The divorce process forces us to organize, review, and often reflect on our financial situation. This is an important part of the property division determination portion of the divorce process and can naturally lead to conversations about estate planning.
If you find yourself in this situation, know that you are not alone. Recent studies find the rate of gray divorce has doubled since the 1990s and more in this situation are looking to put together or update their estate plans. You can better ensure this goes well by avoiding these three common mistakes.
#1: Putting it off.
It is important to make sure all the legalities of the divorce are finalized and take time to heal before adjusting an estate plan — and it is also important not to wait too long. This is a tough but important balance because updating an estate plan is important to help better ensure assets do not go to unintended beneficiaries. There are few times in life when this risk is higher than following a divorce.
#2: Neglecting beneficiary designations.
Although it is important to update a will and trust because they handle the transfer of certain assets, this is just the beginning. Other assets are guided by beneficiary designations. This can include insurance polices, bank accounts, and certain retirement assets. Review and update these designations to make sure the asset transfers to the appropriate individual or, in some cases, to the right trust.
It is also important to note the importance of reviewing and updating healthcare directives or living wills.
#3: Avoiding your children.
Divorce is not new. As such, we have data on how divorce impacts children. Although the impact is different on younger children compared with older children, it is important to note that the divorce still impacts our adult children. Take the time to discuss this openly with them and prepare for some hard conversations.
In addition to discussing the divorce, it is also important to discuss the impact of the divorce on the estate plan and how it could affect your children. Estate planning disputes are often rooted in misunderstandings. This was recently highlighted with the court battle over Aretha Franklin’s estate when her sons argued about her true intentions. Having a clear discussion with all involved can reduce this risk and better ensure a smooth transition.