Divorce may end a marriage but it does not unilaterally remove your spouse from life insurance, pension and retirement accounts. Assuming otherwise can prove to be a serious error. Fortunately, this matter tends to be addressed early in divorce proceedings by both client and attorney. It begins with the Will and the fear that a spouse might end up with the other’s estate, in charge of all affairs. Once this big topic is broached, the aforementioned concerns might be addressed. Filing for a divorce does not sever all ties. That is why all of the above should be discussed as early as possible. The status of your estate plan, not to mention all beneficiary designations, ought to be hot topics for discussion with an attorney.
The Reciprocal Will
Most married couples have what are called reciprocal Wills, where each spouse is named the beneficiary of the other’s estate. If one should die before the other, there might be children designated as contingent beneficiaries. This all holds true as long as the couple’s status is ‘married’. The stumbling block tends to be that, while a divorce is pending, that status continues. Only when a final judgment is handed down, do all beneficiary or representative designations get revoked.
In the meantime, marital status is nothing more than a status quo. It is a boat that might not need to be rocked. It is the court’s preference that it be maintained during the pendency of a divorce. That is why if a spouse wants to know if he or she should make any changes, it is best that a conversation be had with an attorney regarding the financial latticework contained within the Will. What is to be gained by making changes needs to be weighed against rocking that boat in the eyes of the court. In other words, haste might just make waste that any average person in the middle of a divorce can’t afford to make.
Try to imagine the effect of altering beneficiary designations during a divorce! That would be why the law actually anticipates this by establishing a policy where insurance coverages are not to be cancelled or modified. Unless the court orders it, the right move is to let all designations be for the time being.
So far, the main idea has been to protect the status quo until the divorce has been finalized. Once that is in your rear view mirror, there will be a few checkpoints to review with your attorney.
- Children: Are your children provided for? Who gets custody in the event of your death? Now that your estate is in a new order, you want to ensure that any changes in your life insurance directly benefit them and no one else. Discuss designating a trustee to administer these funds in your absence.
- Remarriage: By now, you must realize that every time you marry or dissolve a marriage, your affairs stand to withstand some shuffling, to say the least. Any subsequent marriage should require another review of your estate plan.
- Documents: Divorce certainly leaves behind a great deal of paperwork. Reviewing and updating certain documents may be in order. Aside from the Will, there are revocable trusts, powers of attorney, bank and brokerage accounts with “pay on death” provisions, titles to property, etc.
There may never be a time throughout your entire relationship with your soon-to-be ex where the legal and financial complexity of marriage is more apparent. That would be all the more reason to put the brakes on, rather than hit the accelerator. Hand the wheel to an experienced divorce attorney. Call our offices today.