Estate Planning After Your Divorce
Every year, about two and a half million American marriages end in divorce, meaning about five million people have undergone a major change in their legal and family relationships. In the aftermath of your divorce being made final, it is tempting to have nothing to do with legal matters for a while. That's understandable, but you should make one more trip into a lawyer's office—an estate planning lawyer. Hopefully, you will live a long, happy, and healthy life after your divorce, but you will sleep better at night if you have an estate plan that lines up with your new reality. Let's talk about estate planning after your divorce.
Why You Should Review Your Estate Planning Documents Post-Divorce
When you made your estate plan, you probably did so with the idea that your spouse would be your primary beneficiary, and that he or she would administer your estate if you died. If you suffered an illness or accident that incapacitated you, you probably appointed him or her as your agent under a power of attorney, to make your medical and financial decisions.
At the time, those choices seemed reasonable. After divorce, they might seem like a nightmare scenario. It is true that Ohio is one of many states that precludes an ex-spouse from inheriting under a will that was created during the marriage. Some such laws also apply to beneficiary designations on retirement plans or life insurance policies. But remember that laws vary from state to state, and the state in which you live right now may not be the one in which you live at the time you die. A much better plan than relying on the application of state law (which might involve litigation for your heirs) is to make sure your estate plan is current and clear.
In particular, you will want to review:
- Who is designated as trustee of your trusts;
- Who is appointed as agent under any powers of attorney for your finances or medical care;
- Who is named as executor in your will;
- Who is named on any titles or deeds, including transfer-on-death or payable-on-death documentation;
- Who is named as beneficiary on any investment, insurance, or retirement accounts;
- Who is named as guardian of your minor children in the event of your death or incapacity.
Protecting Your Minor Children's Assets in Your Divorce and Estate Plan
While you were married, you and your spouse likely assumed that if either of you died, the survivor would inherit most of the assets. To the extent that any of your wealth was intended for your minor children, the surviving parent would safeguard those assets until the children were old enough to manage it themselves.
After you divorce, you will probably prefer that none of your assets go to your ex-spouse on your death, and that all or most of it will go to your children. If your children are minors at the time of your death, however, another adult will need to have control over any assets they inherit outright. That adult could well be your ex-spouse, unless you provide otherwise. You may trust your ex-spouse to manage those assets. But what if he or she remarries? Your ex's new spouse may have less inclination to make sure that the wealth you left for your children goes directly to them.
If, like most people, you would prefer that your ex-spouse (and his or her next spouse not have discretion over money you intend for your children, you should take steps to prevent that. You can begin taking measures to protect your children's assets even before your divorce by creating trusts for their benefit.
You can appoint a trustee other than your ex-spouse to oversee your children's assets after your death, and you can set terms for the distribution of the assets. Should the children have access to the money as soon as they turn 18? (Probably not.) Should the money be used only for education, or other needs? Depending on the amount of assets in question, and your estate planning goals, an experienced Ohio estate planning attorney can advise you as the best type of trust to use and what terms to include.
Not only will a trust preserve assets for your children's needs, keeping them out of untrustworthy hands, but assets in a trust bypass probate, meaning they will be more readily available for your children's needs.
If you are contemplating divorce, or are recently divorced, don't neglect the important task of updating your estate plan.
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