Divorce is challenging, both emotionally and financially. As you work through all the changes, it’s easy to overlook the legal documents that make up your estate plan.
Updating these documents is just as essential as updating your bank accounts. Let’s take a look at some modifications that will likely be necessary.
Unintended consequences
If your estate plan lists your spouse as a beneficiary, it’s important to know that Virginia automatically removes their rights to inherit via your will, unless it specifically states otherwise. However, relying on the state’s default rules can lead to confusion and litigation. Updating your will is the best solution.
While the state revokes your former spouse’s inheritance rights, unless you name another beneficiary, the funds will be paid to the estate and go through the probate process. This can cause delays and reduce the payout amount. You also want to review the beneficiary designations on life insurance policies and retirement accounts.
During your marriage, you may have appointed your spouse as your power of attorney and health care proxy. These designations give them the authority to make financial and medical decisions if you become incapacitated. You may have appointed them as your executor as well.
After the divorce, you may want someone else, such as a trusted family member, friend or professional, to serve in those roles. Updating these documents helps ensure that the person making critical decisions understands your current values and makes vital decisions that reflect your wishes.
If you have minor children, you may want to set up a trust so that assets are managed responsibly. You can name a trustee other than your former spouse, depending on family dynamics and your co-parenting relationship. This helps ensure that your children will have financial security if something were to happen to you.
Working with a legal representative helps ensure that all your legal documents are up to date. They will work with you to create an estate plan that aligns with your future.
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