The divorce process can be lengthy and costly. However, the responsibilities do not cease once the divorce decree is signed.

To ensure that your financial, property, and estate planning wishes are executed in light of this significant life change, there are three critical actions you must undertake promptly.

1. Amend the Beneficiary Designation on Life Insurance

A life insurance policy constitutes a contract between the policyholder and the insurance company. The policyholder designates the beneficiary, who will receive the proceeds upon the policyholder’s demise, and the insurance company is legally obligated to disburse the funds to the designated beneficiary. Given that the beneficiary designation is a legally binding contract, the insurance company must pay the individual listed as the beneficiary. Depending on state law and the terms of the policy, if the ex-spouse is listed as the beneficiary, the insurance company may be required to pay the funds to them despite the divorce. Although some states have statutes that automatically revoke the beneficiary designation upon divorce finalization, it is prudent to update the beneficiary designations to ensure that your wishes are unequivocally communicated to all parties involved following your death.

2. Update the Beneficiary Designation on Retirement Plans

While state law may automatically revoke a designation on a retirement plan if an ex-spouse is listed, federal law stipulates that the last named beneficiary is entitled to the funds regardless of marital status at the time of death. Depending on the type of retirement account, either state law or federal law may govern this matter. To avoid a potentially protracted and costly dispute for your family, it is advisable to amend the beneficiary designation as soon as possible.

3. Establish or Revise Your Estate Plan

If you and your former spouse had a joint trust, it is necessary to create an individual trust to hold the accounts and property now solely in your name. In this new plan, you will appoint a trustee to manage the trust’s accounts and property and designate beneficiaries to receive the trust’s assets. If you have minor children, consideration must be given to the appointment of a trustee to manage their inheritance, as it is likely that you do not wish for your ex-spouse to assume this role.

If you lack estate planning documents, now is an opportune time to organize your affairs. Post-divorce, you likely have a comprehensive understanding of your assets and their value, which will be beneficial in devising an appropriate estate plan.

Your estate plan encompasses more than just a trust; it includes instruments such as a financial power of attorney and healthcare power of attorney. If these documents are already in place, it is crucial to review them. It is probable that you no longer desire your ex-spouse to have the authority to sign documents on your behalf or make medical decisions for you. Although state law may automatically revoke these appointments upon divorce finalization, it is best to prepare new documents to prevent confusion among third parties regarding who should act on your behalf.

Davis Law Group Can Help

Divorce can be a protracted process. Before embarking on the next phase of your life, contact our experienced divorce, family and estate planning attorneys. We can ensure that you proceed with documents that uphold your wishes and give you peace of mind.