Many people in Kansas City and the rest of Missouri rushed to finalize divorces before the end of the year. The recent tax changes were a major cause of this, as many divorcing couples believed that the old tax laws suited their preferences far better than the new ones.
However, whether couples divorced this year or last, there are some common steps they should take to adjust their estate plan during and immediately after the divorce. Many couples wait until after the divorce is finalized to update their estate plan, but what if something happens before the divorce process ends? It may be the spouse who would have the final authority.
During the divorce
According to Forbes, one of the first things to do before the divorce is finalized is to select a new health care proxy. If a person is incapacitated for any reason, they may not want their former spouse make health care decisions; and this may be the best way to prevent that. This is especially the case for divorces that have not been amicable.
Note also that even without the power of attorney, a spouse may have access to all income and accounts. It may be in a person’s best interest to revoke this access as soon as possible by updating the power of attorney. Keep in mind that the spouse may need to be informed of the change.
Your will and any trusts you have should also be amended. In addition to the same reasons noted above, this helps to ensure minors are properly taken care of. If the spouse cannot be trusted to manage funds for the children, this is a good time to name a more suitable adult as the trustee. Forbes also notes that parents may wish to name a guardian in the will, especially in instances where the parent has substance abuse issues or any other problem that may make them unfit.
After the divorce
Not everything can be changed before the divorce is finalized, For instance, dividing up the 401(k) account may have to wait until after the divorce is finalized or both parties may incur fees. Likewise, if you owned a business with your spouse, you may want to wait until after your divorce finalizes to update any business succession plans.
Some people may also wish to save the entire estate plan adjustment for after the finalization of the divorce to avoid provoking their ex. While this is not a bad idea, take note of the risks mentioned above and weigh the pros and cons. What matters most, however, is that they update their estate plan as soon as they are able.
This article provides information on estate planning after divorce and should not be interpreted as legal advice.