Having an Estate Plan is the best way to insure that your family is protected from probate, taxes, and the unexpected upon your death. Your Estate Plan will direct how your assets will be divided -and if done right – will leave provisions for covering debt and other expenses, and avoid family fights and other problems.
Marriage and divorce significantly affect your Estate Plan if you have one, and make estate planning even more important if you do not. However, even happily married couples often procrastinate creating an Estate Plan thinking their spouse will automatically get everything – including the responsibility of managing the estate. Here are some things every couple needs to know about marriage, divorce and estate planning.
First, both newlyweds will need to change the beneficiary on their insurance policies, existing wills or trusts, retirement accounts and health savings accounts. You both will also need to decide if you want to designate a secondary beneficiary in case you both die, or if you want to leave more detailed instructions in a will or trust.
Next, you will need to update any existing wills or trusts. Or, if you don’t have one, this would be the perfect time to get one. It’s important for your new spouse and you to know how you want your assets allocated should anything happen to you both, how much you want parents and children to get and who should oversee your matters should you both become incapacitated. If you have a prenuptual agreement, a new Estate Plan will probably be required to follow the requirements of the prenup (normally there is always a prenup for second or later marriages).
As part of your Estate Plan, you will also need to create financial and medical durable powers of attorney, otherwise your spouse will not be able to handle your individual affairs should you become too ill to do so -being married is not enough in California. Powers of attorney are even more critical for unmarried couples, as you will have no rights to take care of each other without them.
Once the divorce process is started, you are restricted from making changes to your Estate Plan, assets and beneficiaries. Your divorce attorney will explain this to you. However, it is important to start updated your Estate Plan, starting with your powers of attorney. You probably don’t want your soon-to-be former spouse able to make your financial and medical decisions during the difficult divorce process.
After divorce, you will need a new Estate Plan. You will replace your old marital Will and Living Trust, update beneficiaries, nominate Guardians for minor children of your choice, determine who will handle your affairs upon incapacity or death, and otherwise insure that your “new” affairs are in order. We cannot count how many times a family has come to us upon a loved one’s death only to learn that their former spouse is still the beneficiary of old life insurance polices and retirement plans – don’t be that person!
Are you getting married or divorced? Or do you just have questions about your Estate Plan? Contact us today to schedule your consultation or Estate Plan review.