Divorce and marriage are two major life events that call for a review of your estate plan. Wealth Advisor’s recent article entitled “How to Revise Your Estate Plan After Divorce” explains that beneficiary forms tied to an IRA, 401(k), 403(b) and life insurance will need to be updated to show the dissolution of the marriage. Likewise, Trusts that are drafted during a marriage are often leaving assets to a surviving spouse and utilizing marital tax credits that are no longer available.
In Massachusetts, it may take months between a divorce filing and the completion of the divorce. During this time both parties are still legally married. There are limitations in place due to the legal filings that may prevent you from transferring assets, changing beneficiaries for financial accounts and insurance policies. It may be prudent to consider making such adjustments prior to a divorce filing. Careful coordination with your divorce attorney is advisable in this situation.
Once the divorce is final, consider updating your estate plan as soon as possible. It is too easy to put off this process in beautiful parts of Massachusetts like Cape Cod and Plymouth, when distractions are aplenty. Updating your estate plan is critical at this time. Often, a new Trust will be created, and this serves as a useful axis of your new estate plan. Beneficiary designations for financial accounts and life insurance policies should be updated and the new Trust should be considered in this process. Without a stipulation in the divorce decree ending their interest, an ex-spouse still listed as beneficiary of an IRA or life insurance policy may still receive the proceeds at your death.
If the divorcing parents have minor children, an important conversation should take place about naming guardians in new Wills to care for the children, in the event that both parents pass away.
Attorney Keith McManus is an experienced estate planning attorney, and the law firm of McManus Estate Planning, LLC has successfully created estate plans for clients who are trying to navigate the legal and tax implications of divorce related to their estate plan.
Reference: Wealth Advisor (July 7, 2020) “How to Revise Your Estate Plan After Divorce”