The Importance of Estate Planning for Divorcing Parents
A divorce—no matter how amicable—usually causes a significant change in a person’s finances and estate planning objectives. Almost always, ex-spouses no longer want their former partner to be a beneficiary or otherwise involved in their estate plan. Further, if children are involved, the need to update your estate plan to provide for them is vital.
Unfortunately, many people wrongly assume that any estate plan you had in place while you were married is automatically annulled after the divorce is finalized. As a divorce does not invalidate a will, below are the five most important questions to consider following a divorce.
How to Ensure that my Property and Life Insurance Proceeds Will Pass to my Children?
Going through a divorce can require additional estate planning documents that may not have been necessary prior to this event. For example, when someone is in a happy marriage with children, they will likely be comfortable leaving all of their assets to the surviving spouse as they will use those assets to provide for the children. As divorce eliminates the common desire to leave assets in the control of your spouse, you must provide documentation stating how you would like to distribute your assets to your children. This is true of not only your current possessions but also your life insurance proceeds. To ensure that your life insurance goes to your children while they are still minors, you must create a trust—and choose a reliable trustee—and provide guidance on how you would like your life insurance to be distributed to your children.
Who Will be Granted Custody of my Children After I am Gone?
In most cases, divorced parents are comfortable with their ex-spouse having full custody of the children in the event of one parents’ death. However, if one parent is unfit to raise a child, you must revise your estate plan to include the designation of a guardian. While the courts are not legally required to listen to your request in this situation, they will strongly consider your wishes when deciding what is best for the children.
How Will Remarrying Affect my Estate Plan?
One of the most important estate planning documents to consider following a divorce is a premarital agreement. If you already have children, remarrying can significantly impact your ability to lease assets such as property or financial accounts behind for your surviving children. Many people do not know that a spouse is legally entitled to your assets once you pass away. Thus, if you do not update or create an estate plan specifically leaving assets to your children from a prior marriage, what they receive will entirely depend on what your spouse decides to give them.
Additionally, creating a premarital agreement will help you protect your assets in the event of a divorce.
Do my Tax Considerations Change Now That I am Single?
In 2020, the gift and estate tax exemption is $11.58 million for an individual and $23.16 million for married couples. Thus, when high net worth individuals go through a divorce, they may have to deal with tax considerations that were not needed while married. For example, if one spouse owns $15 million in assets, they will have to reevaluate and update their estate plan to account for new taxes after finalizing the divorce.
What Other Documents do I Need to Review and Update?
The documents you will use in your estate plan entirely depend on your individual situation and goals. However, below are the following most common estate planning documents that should be reviewed, updated, or created following a divorce.
- Revocable trusts
- Powers of attorney
- Life insurance policy beneficiary designations
- Irrevocable life insurance trusts
- Health care powers of attorney and living wills
- Bank and brokerage accounts with “pay on death” provisions
- Beneficiary designations for individual retirement accounts, 401(k)s, other retirement plans, annuities, and health savings accounts
- Titles to property
It is understandable that you don’t want to work with another attorney and deal with more documents following a divorce. However, updating your estate plan is an extremely important thing to do to protect yourself and your children. Fortunately, the attorneys at Antonoplos & Associates make updating or creating an estate plan an easy and simple experience.
Contact our DC Law Office for More Information
Finally, for more information regarding the importance of estate planning for divorcing parents, contact us at 202-803-5676. You can also directly schedule a consultation with one of our skilled attorneys. Additionally, for general information regarding trust and estate law, check out our blog.