All marriages end, either by death or by divorce. Whether you are married, separated or recently divorced, this inescapable fact has consequences for your estate plan.
For a married couple, each partner’s will and other estate arrangements are often intimately tied to the other’s. When separation or divorce enters the picture, however, it is time to review and revise those arrangements in the light of a very different future.
Here are three things to be aware of as you go about that process.
Revising your estate plan involves more than changing your will.
Revising your will is the place to start when changing your estate plan during or after divorce. This can be done by making a new one that states previous wills are revoked.
But changing your estate plan so that it reflects altered marital circumstances also includes updating other related documents. This includes beneficiary designations on insurance policies, retirement funds and investment accounts, as well as your choices for medical and financial powers of attorney.
In some states, a life-insurance beneficiary designation to a spouse is automatically revoked in the event of the couple’s divorce. But Illinois does not have such a statute.
Making multiple updates may seem cumbersome. Yet it is necessary because changing beneficiaries in a will is not sufficient to change beneficiaries on assets that pass to others outside of the will, such as life insurance or retirement accounts.
You may want to change your healthcare proxy or financial power of attorney even before the divorce becomes final.
When you were together as a married couple, you may have given your spouse access to all of your financial accounts and empowered him or her to make medical decisions for you if you became disabled.
If your relationship is no longer an amicable one, it makes sense to change your healthcare proxy before the divorce is final. The same is true of financial power of attorney.
A second marriage requires careful planning and perhaps a pre-nup to pass property to your children.
Many people have found new leases on life and love by finding new partners after a divorce. And there are getting to be more and more blended families. We wrote about the challenges of blended families in a recent post.
If you are thinking of getting married again and you have children from your first marriage, estate planning for a second marriage requires careful consideration.
What you want to avoid is a conflict between those children and your new wife. You may need a prenuptial agreement to make clear how much of your property the children from your first marriage will get in the event of your death.
Depending on your family’s circumstances, another option might be to create a trust for the benefit of your children. If you go with this option, you will have to decide whether to make the trust revocable or irrevocable.