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Estate planning considerations in conjunction with divorce

When going through a divorce, you can easily get wrapped up in the immediate problems and the emotions of the moment. You may not be looking past D-Day - the expected date when you will be officially divorced.

Don't overlook your estate plan. Scenarios can arise during or after divorce that could change everything for you and your children - as well as a future partner. You'll want to address these issues with your divorce lawyer and your estate planning and financial professionals.

Estate plan changes during divorce

Divorce proceedings can last for a year or more. That's a long time to be in limbo. If you are preparing to divorce or if proceedings are already underway, there are proactive estate plan moves you can make now to avoid awkward or undesirable situations:

  • Health care proxy - Your spouse is most likely listed as the emergency contact if you are injured or incapacitated. Your spouse may also have medical power of attorney or be named on an advance directive (living will).  If you don't want your soon-to-be-ex making medical decisions on your behalf, arrange to substitute a trusted friend or relative on those documents.
  • Power of attorney - Your spouse may or may not have power of attorney (legal authority) over your business and financial affairs. If so, you will want to rescind or amend those documents. If not, it might be a good time to grant power of attorney to a third party to proactively protect your interests. Otherwise, your spouse might transfer assets, sell off your prized possessions, or otherwise wreak havoc.
  • Your will - If you were to die before the divorce is final, your spouse would likely get everything or a major share of your assets, per the terms of your "last will and testament." You should change your will to reflect your pending divorce, without being so drastic or vindictive that the new will is challenged in court and overturned.

    Conversely, if you do not have a will, it's time to write one. In the absence of a will, your estranged spouse is entitled by New Jersey statute to inherit half (or more) of your personal estate. Don't let your estate - or your children's inheritance -- go to the wrong person.
  • Guardianship of children - You cannot dictate child custody terms in a will, but you can nominate a preferred guardian (godparent/grandparent) in the event that you and your ex are deceased or incapacitated.

Considerations after the divorce is finalized

Some matters cannot be changed while you are still legally married. For example, retirement benefits accumulated during marriage are considered marital property. They are apportioned in a QDRO (qualified domestic relations order). You cannot simply claim them as your own.

If your spouse is still listed as a beneficiary of your life insurance policy, he or she could inherit some or all of your estate even years after divorce. The U.S. Supreme Court is considering exactly this scenario. Many spouses simply forget to make these important changes once an ex-spouse is out of sight and out of mind.

As soon as feasible after divorce, you should:

  • Name someone else as your life insurance beneficiary
  • Change your 401(k) or pension beneficiary designations
  • Remove your ex-spouse from the title of real estate holdings
  • Remove your ex's name from any bank accounts or credit cards
  • Update your will to reflect these changes

A good divorce attorney will help you identify potential pitfalls and so you can alter your estate planning documents accordingly.

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