There are hundreds of details that couples must iron out as they go through the process of filing for divorce. These include a parenting plan, custody, dividing assets and debt, and other issues specific to the family. Often left until after the fact, or completely overlooked, many do not alter estate plan arrangements.
Colorado law automatically revokes appointments or bequests made to former spouses once the divorce is final – they are regarded as deceased in the eyes of the law. The assets are automatically shifted to the next of kin, such as children. However, this can make the estate needlessly complicated, particularly if the children are too young or unable to oversee your estate administration. The good news is that updating these arrangements can be as easy as changing the names on essential estate planning documents.
What needs to be changed?
Relevant estate planning documents include:
- Power of attorney
Other arrangements where the spouse is the beneficiary include life insurance policies, annuity contracts, pensions, profit-sharing plans, or other contractual arrangement providing for payments to the spouse. The designations can remain in effect (perhaps as part of the property settlement) if the divorce settlement agreement stipulates that the designation remains.
Why is this important?
Estate law attorneys generally recommend keeping this vital information up to date. The reasons for this include:
- Protecting important assets
- Minimizes tax obligations
- Ensures that the deceased’s intent or wishes regarding these matters are honored
- An organized estate reduces the stress upon surviving loved ones
Protecting assets is essential
The law typically protects assets from falling into the wrong hands. Still, financial institutions have no liability in paying the wrong person, and they do not check to see if the policyholder’s beneficiary is still the spouse. There would be legal recourse if the ex is paid in error, but this may be of little consequence if the ex-spouse already spent the money.
It is smart for those in the process of divorce to also update their estate. Since you will likely have all this information gathered together as part of assembling the assets, it also makes it a great time to make these other changes.