Estate Planning Items To Consider After A Divorce
Considering filing for a divorce is a difficult decision, and the entire process can weigh on you physically, mentally, and emotionally. Divorcing couples deal with multiple challenges and life-changing decisions like property division and child custody.
During the divorce proceedings, all marital assets are valued as of the date of separation and typically divided equally. Since estate plans don’t always consider that the parties may divorce, overlooking them can cause severe problems down the road. To help you get your affairs in order, we’ll walk you through 5 estate planning items to review after a divorce.
What Happens in a North Carolina Divorce?
North Carolina is an equitable distribution state, meaning that marital property is typically divided on a 50/50 basis. Marital property distribution may also consider other factors such as:
- Duration of the marriage
- The assessed value of marital property
- Net worth and income of each spouse
- Each spouse’s contribution to marital property
- Equitable claims to marital property
- The presence of a prenuptial or postnuptial agreement
What Estate Planning Items Should I Review After Divorce?
Both spouses are often involved in estate planning during a marriage. In the event of a divorce and a later property distribution, it’s essential to change your estate plans to reflect the new changes in your life.
Here are the estate planning items you need to review after divorce.
1. Your Will
A will is meant to protect your property and your family in the event of your death. Most people have their spouses as one of their will’s beneficiaries. In a divorce, you need to change your will to remove your spouse as a beneficiary if you don’t want your prior spouse to receive property as an heir.
2. Advanced Directives and Power of Attorney
A power of attorney (POA) and advanced directives documents are familiar to people who have a will. If your ex-partner or ex-in-laws are named in the documents, you should create a new document and name a new attorney in fact.
A general durable lPOA grants your principal a legal right to act on your behalf should you be incapacitated. Since relationships tend to change after a divorce, your former spouse may not be inclined to act in your best interest.
To protect your assets and your estate, you can change the documents at any time, even before the divorce process is complete.
The documents signed during a power of attorney or advanced directive include:
- An expressive will or an advanced directive – Gives the principal power to oversee your estate and personal affairs if you are in a vegetative state or incapacitated.
- A healthcare power of attorney – Gives the principal power over your medical decisions
- A general power of attorney – Gives the principal decision-making rights over your financial and legal status.
3. Retirement Accounts
According to the American Psychological Association, first-time marriages have a 50% chance of ending in divorce.
Even with those unfortunate statistics in mind, no one gets married with the intention of getting a divorce. It’s therefore normal to include your partner in your retirement plan. However, if the marriage fails, you need to revise all your retirement accounts, including:
- Bank accounts with ‘payable on death’ clause
- Investment accounts that are ‘transfer after death’
- Retirement accounts like pension, 401(k)s, and IRAs
- Life insurance policies
Upon finalizing your divorce, ensure you contact all the companies you have accounts or policies with and update the information. The companies will not change the names and list of people named as successors unless directed to do so.
4. Legal Guardianship of Your Children
In a marriage, both spouses are the joint custodians of the children. In the event of one parent’s demise, divorced or otherwise, the surviving parent typically maintains guardianship. After divorce, you can name your ex-spouse as the children’s guardian when revising your estate plans. However, if your ex-spouse has a substance abuse problem or is unfit to be a parent, you should revise your will and estate plan and name someone else as the children’s guardian. Even though naming another person is your will as your children’s guardian is not binding on a court, it is evidence that the court can consider.
What Happens if There Was a Prenuptial Agreement?
A prenuptial agreement or prenup is a legal contract that lists responsibilities, marital rights, and estate division in case of death or divorce. The agreement is signed before a couple gets married and effective after they get married.
Although not every couple signs a prenup, those who do have set limits on financial spending during marriage and the division of the assets after a divorce. Therefore, prenups can preserve the children’s inheritance from a previous union.
Without a prenup, the assets acquired during the marriage are generally considered co-owned, and these are subject to division during a divorce.
What Happens If You Don’t Create an Estate Plan?
An estate plan is a crucial document regardless of your wealth or age. By virtue of owning the estate, you have a legal right to choose the beneficiaries of your hard work. Without an effective estate plan, you may lose control of what happens to your assets in the event of your death, and your estate will be administered according to North Carolina’s intestate laws.
Our Estate Planning Team Can Help
Consulting with an experienced estate planning attorney ensures that your estate plan accomplishes what you want to have in place if you’re going through a divorce and need to revise your plans.
The team at Schulz Stephenson Law is here and ready to help you evaluate your options and build an estate plan that will help protect your loved ones after your death. Call us today or fill out our online form to schedule a consultation!