One of the biggest questions that we receive is what one should do with their estate plan, after a divorce.
Question: I got a divorce. I think my spouse was named in my estate plan. What should I do?
Answer: If you don’t want your spouse to inherit any of your assets or be the one to make critical decisions for you, you must revise your estate plan! Updating your estate plan is critical when you go through major life events. This includes getting divorced and having children. If you made your estate plan while you were married, you likely named your spouse in a number of places. Here are the things you probably need to update:
- Fiduciaries/Agents: When you created your estate plan, you probably signed one or more powers of attorney and health care directives. This likely included a Health Care Power of Attorney and a Durable (Financial) Power of Attorney. The purpose of these documents is to name someone who can make decisions for you if you become incapacitated and unable to make those decisions for yourself. This would include making your critical health care decisions or managing your finances. Assuming you don’t want your former spouse doing these things, you should update these documents and name a family member or friend instead.
- Asset Distribution. When people create estate plans while they are married, it is very common to name your spouse as the person who should inherit everything. After your divorce, you might prefer that your assets go to your children or other family members instead. To do this, you should see an estate planning attorney to update your Will or Trust. Trying to update these documents yourself by crossing things out can lead to big problems down the road.
- Insurance Policies. If you have life insurance policy and you purchased it while you were married, chances are that you named your spouse as the beneficiary. People often forget to update their policies which results in a former spouse getting the entire life insurance benefit when the benefit really should have gone to a person’s children or family members. To update this you will need to talk to the company who issued your policy. They will have you fill out a form called a beneficiary designation. When you fill out that form, name the new person(s) who should inherit the life insurance benefit.
- IRAs and Retirement Accounts. Like a life insurance policy, you had to name who should inherit the funds in your IRA or retirement account if something were to happen to you. Like most married people, you probably named your spouse. Like you do with your life insurance policy, contact the company who manages your IRA or retirement account and tell them you want to update your beneficiary designations. You may even be able to do this online with your account holder.
- Other Assets. Other types of assets allow you to specify who should inherit the asset upon your death. The Arizona Motor Vehicle Department allows you to fill out a beneficiary designation for your vehicles. Your bank will let you fill out a pay on death designation that says where the money in the bank account should go if you passed away. You should think about anywhere else you may have named your former spouse as a beneficiary and update your beneficiary designations on those assets as well.