It's our job to help them and their loved ones avoid future conflict, heartache, and messy financial wrangling down the line.
When married couples create estate plans, both spouses typically name each other as agents in case of incapacity and as primary beneficiary upon the first death. This is reasonable, but it's important to ensure there are provisional situations addressed.
For example, what happens if they divorce? Between 1990 and 2010, the divorce rate doubled for people over the age of 50 and more than doubled for those over 65, according to a recent Forbes article on estate planning for Baby Boomers.
We recommend the following updates not only to clients who are divorcing but also to those experiencing or expecting any major life changes during the year.
1. Wills & Trusts
Wills and trusts are an obvious place to begin. Clients need to ensure these important legal documents are updated and that loved ones and trusted advisors know where to locate them.
2. Beneficiary Designations
Clients should update the beneficiary designations for life insurance policies and retirement funds. This is an often overlooked, but crucial change to be made during divorce.
3. Health Care Power of Attorney
There are also medical concerns to address. Clients should be reminded to change their health care power of attorney documents naming who will handle medical decisions and advocate on their behalf in the event that they are incapacitated and unable to express their wishes.
In addition, advanced health care directives (living wills) should be updated to reflect this change as well to reflect a client's new designee of choice.
4. Financial Power of Attorney
As well, a new designation should be made for the durable financial power of attorney, so that the correct person has authority to handle money matters when clients are unable to do so for themselves.
5. Estate Planners
Divorced clients might need to change their estate planning attorney. The Wall Street Journal addressed this particular issue last year in an informative article we suggest reading.
Married couples generally worked together with the same planner when they created their plan, but when divorcing, they are most often best suited to find other planners on their own to avoid a conflict of interest.
6. Qualified Domestic Relations Order
Many people may choose to allow ex-spouses rights to a portion of funds as part of the divorce settlement. Clients should file a Qualified Domestic Relations Order in order to designate exactly what those ex-spouses are entitled to and how it should be distributed. This will spell out their wishes clearly and help to alleviate disagreements and legal entanglements in the future.
Divorce is a difficult decision, but clients can minimize the long-term effects by handling these important estate planning issues right away. We encourage clients to tackle these issues head on and avoid costly and painful legal problems for their loved ones down the line.
To learn more about common estate planning issues, check out our free guide, Estate Planning Pitfalls: The 12 Most Common Threats to Your Estate & Your Family's Future, or to discuss your estate planning concerns, please call our office at 919-443-3035 or use our contact form.