Posted on January 10, 2019 By Judy Tan Editor's Pick, Relationships

Divorce is never easy. Even if a couple is lucky enough to have an amicable split, there is still a long list of tough tasks and difficult choices that need to be dealt with before, during and after the divorce. One such task is updating the estate plan.

Splitting from a partner will obviously change your feelings about where your money will go, who will make decisions and other important things after your death or if you become incapacitated. These changes need to be legally addressed in your estate plan. Use the following tips to make sure you correctly and adequately update your estate plan after a divorce.

• Determine What You Can Change – The first step to updating your estate plan post-divorce is to find out what you can and cannot alter during a divorce settlement. For example in most states, you legally aren’t allowed to change beneficiary designations (ie: life insurance or retirement accounts) until after the divorce is settled. In fact, filing a divorce complaint often automatically restrains activity on assets.
• Powers of Attorney – There are a few different categories of power of attorney, including health care proxy, and financial and legal executors. You need to look over your estate plan and make necessary changes regarding powers of attorney. For example, if you’re in a car accident and become incapacitated, do you want your ex-spouse to have the power to make heath care decisions? Or, as you age, you might lose your mental faculties and be deemed unable to make financial decisions. Do you want your ex-spouse in charge of your finances? You can learn more about how to change powers of attorney here.
• Update Beneficiaries – After your divorce is finalized, you need to rethink and update your beneficiary designations. Take a look at designations for:
  • Life insurance policies
  • Retirement accounts such as IRAs and 401(k)s
  • Pay on death accounts
  • Transfer on death brokerage accounts

You need to legally change beneficiaries by requesting new documents from the necessary source, update them, and return them as soon as possible. Never assume that divorce laws automatically revoke previous designations you made. In fact, most pensions, 401Ks, and similar plans are under the Employee Retirement Income Security Act, meaning a plan administrator must turn over funds to the listed beneficiary no matter what state law says. Check out the Department of Labor website for more information on this law.

• Update Your Will – Decide what you want to leave your ex-spouse, if anything, and update your will to reflect any changes. However, be aware of any state laws about divorce and inheritances. In some states, you are not allowed to completely disinherit a spouse. Talk with your attorney to make sure you’re inside the law.
• Revisit Your Trust – Don’t forget to update your revocable trust. Check if you previously planned gifts for your ex-spouse’s family you want to remove. A big thing to think about is if you want to let your ex manage any money left to minor children. If not, choose a reliable trustee.

Don’t let the pain of a divorce distract you from taking the necessary steps to update and protect your finances.

How did you re-evaluate your estate plan after a divorce? Share your story below. Don’t forget to check out other articles on similar topics and more.