The pain and stress of divorce
A divorce can be painful and stressful, and going through the process may drain a person’s energy. When the final order is issued, many people tend to think that the entire process is complete. Sadly, this thought is incorrect.
A newly divorced person has many tasks to complete, including selling or refinancing the family home, selling and retitling other assets, and, if minor children are involved, adapting to new routines regarding school and parental visits. One of the essential tasks that is commonly overlooked is re-examining and amending an individual estate plan.
Most estate plans involve the testator’s (the maker of the plan and owner of assets that will be transferred) spouse, either as a trustee or as the recipient of important assets. Most divorced persons would not like to leave their ex-spouse with so much power, and reviewing an estate plan after a divorce is an important step in making sure such outcomes do not occur.
Many assets allow a person to name a beneficiary who will inherit the asset upon the owner’s death. These assets include life insurance policies, employer-funded retirement plans, annuities, and bank accounts.
Changing the beneficiary designation for these assets is crucial to keeping important assets out of the hands of an ex-spouse. Naming children as beneficiaries may necessitate another court proceeding to appoint guardians for any children under the age of 18.
Retirement accounts may require special attention because the proceeds must be distributed within 5 or 10 years after the owner’s death. However, the assets in the account can be distributed over the beneficiary’s lifetime if the beneficiary meets important IRS criteria. A knowledgeable tax attorney will almost certainly be needed to make important decisions about this area of the tax code.
Health care and financial powers of attorney
Most married couples give each other significant legal power by naming them as trustees or giving them powers of attorney. The failure to revise these grants of legal authority after a divorce could leave the ex-spouse in charge of many financial or healthcare decisions, a situation that would leave many people feeling very uncomfortable. Terminating these powers and replacing the person who holds the power is essential to returning to a normal life after the divorce is final.
The need for an attorney
Many of these decisions can be legally complex, as can the overall process of tending to essential post-divorce tasks. The advice of an experienced Maryland estate planning attorney can be very helpful in identifying and accomplishing the necessary post-divorce actions.