Once a divorce is final, both parties are likely to want to move along and think about things other than the endless paperwork that was involved in the process. However, it is important to take the time to deal with estate planning concerns that may result from a newly single status.
One of the first things that may need to be considered is an existing will. In many states a divorce makes any will null and void, which does avoid the problem of an ex-spouse unintentionally inheriting but also leaves the newly divorced person intestate. In the absence of a new will, state law will determine where the estate goes, with results that could be different from what the deceased actually wanted.
It can also be important to remove the ex-spouse as a beneficiary on brokerage accounts, life insurance policies, retirement plans and annuities. These type of designations will generally supersede what is specified in a will, so an ex-spouse can still inherit these assets if the beneficiary designations aren’t changed. The U.S. Supreme Court ruled recently in favor of an ex-wife who benefited from a life insurance policy her ex-husband had never changed. The couple had been divorced for ten years, and he had been remarried for six. While Virginia law said beneficiary designations are void at the time of divorce, it was a federal life insurance policy and thus federal law preempted the state statute.
It is not often easy to work through financial issues during and after a divorce, but it can be prudent if all financial documents are carefully reviewed and changed to the proper beneficiaries. Taking these steps is helpful to both parties in the divorce as a method of laying a foundation for financial independence.
Source: Forbes, “Divorcing Women: Don’t Forget To Update These Key Documents“, Jeff Landers, December 04, 2013
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