Critical Decisions to make to your Estate Planning Documents DURING your divorce
|
If
you already have Advanced Directives (Durable Power of Attorney and Health Care Power of Attorney) or Life Insurance Policies in place and you are going through a
divorce, you have some very important steps to take NOW! Without a doubt, your divorce will have a major impact on your estate plan. I know...this is the last thing you want to hear in the
middle of your major life change. After reading on, I think you will agree that you should be speaking not only to a Family Lawyer but an Estate Planning Attorney as well.
Remove your Spouse as your Named Agent
It is important that you change your Advanced Directives (Powers of Attorney and Health Care Power of Attorney) DURING your divorce and not wait until it is finalized.
Why? If you are in an accident during your divorce and unable to handle your financial affairs and/or make your own medical decisions, and your current documents name your spouse as your agent, it is your
soon-to-be ex who will be making your health care and financial decisions. This ultimately means he or she will
be in control of your money and your medical decisions.
Change Your Beneficiary Designations
You
also want to make certain that you review all of your beneficiary designations
during and after your divorce. This is absolutely critical and often
overlooked. And, you should do it even if your divorce agreement says
your ex will not receive any benefits. If you do not change your
beneficiary designations, your agreement may be superseded!
There's actually a recent case from the United States Supreme Court addressing
this very issue. Husband and wife got divorced and husband never
changed his beneficiary designation on his pension account. Then,
Husband died. The pension administrator paid the benefits to his
ex-wife, as indicated by the beneficiary designation. Husband's
daughter from a prior marriage sued for the benefits claiming that the
ex-wife had given up her rights to the pension in the divorce
agreement. The trial Court heard the case and agreed. The
Appeals Court heard the case and disagreed, saying
that the beneficiary designation trumped the divorce agreement. The
United States Supreme Court upheld the appellate court decision that
the beneficiary designation trumped the divorce decree. Kennedy v. Dupont, Slip Opinion no. 07-636,
U.S.
Supreme Court (2009).
Review Your Life Insurance Provisions
If
you have any kind of a requirement in your marital settlement agreement
that life insurance should be maintained on the life of either spouse
for the benefit of the children, you should have this provision
reviewed by your estate planning lawyer.
We've
seen so many provisions like this that are just not well thought out.
For example, a provision that says "Husband/Wife shall maintain life
insurance having an aggregate death benefit of $250,000 for the benefit
of the minor children" sounds great, right? But, this is just the kind
of provision that provides no protection for the minor children at all.
- How long does the insurance have to be maintained?
- What type of insurance has to be used?
- Can spouse just get a cheap 1 year term policy that needs to be renewed each year?
- What if spouse gets ill and becomes uninsurable? Who should be the beneficiary of the policy?
An
effective provision should provide the type of insurance and the
minimum length of time it must be in force, specific ratings
requirements for the insurance company and whether the policy should be
in trust or payable to a trust. Your estate planning lawyer can help
to identify these issues where even a very good divorce lawyer may
overlook them.
The Bottom Line...
Your divorce has real, meaningful implications for your estate
plan. I know it is not something you want to think about and yet if you
don't, you may regret not having handled these matters now.
Next Month
Find out next month why a Last Will and Testament may not be one of the Estate Planning documents you can alter prior to a divorce.
|
