Reviewing And Reevaluating Estate Planning Goals Following A Divorce

Apr 16, 2024 | Estate Planning

Going through a divorce, especially if you and your spouse were married for a considerable time, is a significant transition that will likely have far-reaching implications on your life. Your estate planning goals and arrangements, especially, will be heavily impacted; as you navigate the complex tasks of untangling shared assets and redefining your future, it is important that you take the time to revisit and reassess your documents to ensure that they align with your current wishes and circumstances.

Reviewing and updating your estate plan following your divorce is not only prudent, but essential to safeguarding your interests and protecting your loved ones. In this blog, we’ll explore the key considerations and steps involved in this process, so that you can be empowered to do so with clarity and confidence.

Understanding The Impact Of Divorce On Estate Planning

Divorce has a profound impact on various aspects of estate planning, making it necessary to conduct a careful review and alteration of your existing documents. First, you should update your beneficiary designations on life insurance policies, retirement accounts, and other financial assets to reflect your post-divorce wishes and prevent your money from being distributed to your former spouse or other unintended individuals.

Your will and trust(s) will also require revision to remove your former spouse as a beneficiary and appoint new heirs or beneficiaries, if you so desire. In Alabama, state law automatically revokes certain estate planning provisions related to your former spouse following your divorce, specifically under Alabama Code Section 43-8-252 which revokes any provisions in their favor, unless expressly stated otherwise. In the absence of your spouse and without any new appointments, your loved ones will likely have a difficult time gaining access to your assets upon your death. This is why a timely revision is critical to protecting your intentions.

Additionally, powers of attorney should be reassessed to ensure that only an individual (or several individuals) you inherently trust is authorized to make financial and healthcare decisions on your behalf, should you unexpectedly become incapacitated. Understanding these impacts is essential for ensuring that your estate plan accurately reflects your post-divorce wishes and safeguards your interests and assets.

Steps To Review And Update Estate Planning Documents

1. Gather all existing documents – locate and gather all of your most recent estate planning documents, such as your will(s), trust(s), life insurance policies, retirement accounts, and powers of attorney. While you should have several copies of your own, if some unforeseen circumstance has left you without them or unaware of their location, the attorney who crafted the documents for you should be able to provide you with more copies.

2. Assess Beneficiary Designations – at the risk of sounding redundant, we must once again stress how important it is to revisit your beneficiary designations following your divorce. Beneficiary designations supersede whatever is in your will, so whether you’ve been divorced for ten minutes or ten years, your ex will be the one to access your accounts if you never removed them as beneficiary. Don’t make the mistake of thinking you’ve covered all your bases because you amend your will!

3. Update your will and trust – in some cases, it may be better to simply revoke your old will and trust and craft a new one that reflects your post-divorce wishes. A skilled estate planning attorney can help you determine what the best course of action is based on your individual circumstances.

4. Review powers of attorney – if necessary, appoint new individuals to make financial and healthcare decisions on your behalf in case you become incapacitated.

5. Consider guardianship – if you and your ex share minor children, you may want to revisit any guardianship provisions you previously created, depending on your individual custody arrangements.

6. Ask close relatives to do their own review – it may be possible that another family member, usually an immediate relative, has your spouse named in their estate planning documents, as well. You should remind them to conduct their own review and make adjustments as they see fit.

Estate Tax Considerations

Divorce can also have significant estate tax implications that warrant careful consideration and planning. One key aspect to address is changes in your tax filing status, as you transition from filing joint tax returns to filing as a single individual. This change can impact applicable tax rates and deductions, potentially affecting overall tax liabilities.

Additionally, divorce may impact estate tax exemptions and deductions. It’s important to reassess your estate planning strategies to maximize available exemptions and minimize potential tax liabilities. Some possible ways to approach this may include restructuring ownership of assets, utilizing trusts, and implementing gifting strategies to optimize estate tax planning. Consulting with a knowledgeable estate planning attorney or tax advisor who can provide tailored guidance and implement strategies to mitigate tax burdens while protecting your assets is the most effective option.

Prepare For The Onslaught Of Emotions You May Experience

Divorce, in itself, is an incredibly emotional experience for most people. Having to go through yet another legal process like this, which further solidifies the ending of your marriage, has the potential to make you feel as if you’re going through divorce all over again. It’s important to prepare yourself for the emotions that may come along with this process so that you can preserve your overall well being.

It’s also worth noting that no one can force you to make any changes to your estate plan that you don’t want to make. In some cases, spouses choose to end their marriage but still remain close friends and don’t want to make any changes at all! If that’s what works for you, then by all means, choose the path that works best for you.

Trust The Ladd Firm To Simplify The Process And Give You Peace Of Mind

Your divorce has likely added enough stressful things to your plate – with our help, this doesn’t have to be one of them. The Ladd Firm is committed to using our experience and comprehensive knowledge of Alabama estate and probate law to ensure that your legacy will be preserved according to your intentions!

For 30 years, we have been serving Alabamians in all manner of their estate planning needs and empowering each and every family to feel confident in the future, no matter what it may bring. Our knowledgeable estate planning attorneys, Banks Ladd and Mary Carol Ladd, have over 50 years of collective legal experience, putting you in the best position for success. Call today to schedule your free initial phone consultation and discover your next steps!

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