A divorce has a significant financial and emotional impact on your life, regardless of how you get the divorce. There are additional challenges when you are a parent and have to navigate a new custody arrangement and family dynamics with your ex-spouse and children. When your life goes through changes like these, one important thing to consider is how it impacts your existing estate plan. An estate planning attorney can help you manage the potential alterations to your estate plan during this tumultuous time.
For most people, the point of an estate plan is to protect yourself and your loved ones, safeguarding your estate during your life and after your death. If the plan does not reflect your current needs and wishes, these benefits no longer apply. You may have individuals you no longer trust tasked with your end-of-life care, or disputes over your wishes may prevent your children from getting the benefits you leave for them. You want to review an estate plan frequently to avoid this.
Spousal Inheritance Rights After Divorce
When you and your spouse finalize your divorce, your spouse is no longer a potential heir under intestate succession law in most states. However, this removal of your spouse as an inheritor does not always apply to an estate plan.
Some states remove an ex-spouse as a beneficiary automatically from revocable documents in the estate. If this happens, these assets will no longer have beneficiaries, and you must name additional beneficiaries. Otherwise, these assets may go through probate court. You may also need to remove a spouse from certain assets in your estate plan manually.
Even if you have never created an estate plan, it is likely that you named your spouse as the beneficiary on other accounts, such as a life insurance policy, investment accounts, bank accounts, and retirement accounts. After a divorce, it is useful to review these accounts and beneficiary designations to determine if they still reflect your wishes.
Assets After Divorce
A divorce also significantly alters the assets and financial resources in your possession. In most divorces, you lose approximately half your marital assets to your spouse. If that asset is still listed in your estate plan, it can create confusion and disputes during the process of distributing those assets. If enough assets in your estate plan are not yours to own, the entire plan may be unenforceable. The estate would then enter probate court, which is what individuals create an estate plan to avoid.
A divorce may also leave you with additional debts or fewer assets to take care of yourself. This may change how you want to handle certain financial issues before the end of your life and limit the benefits you give your beneficiaries.
Your Children’s Inheritance and Care After Divorce
In an estate plan, you can designate a guardian for any minor children you have. After a divorce, this may no longer be your ex-spouse. You may want to alter or add contingencies for an appropriate guardian for your children.
If your children are minors, you want to be careful how you leave them an inheritance. You can name them as heirs to assets in your estate, but they may be unable to retain control over those assets until they are of age. When that is the case, your ex-spouse may be given control of those assets.
If you create a trust for your children’s inheritance, you can stipulate when your children receive the assets and name a trustee to look over the assets until then. A trustee has a fiduciary duty to the beneficiary and must look after their interests.
Q: How Does Divorce Affect Your Finances?
A: In a majority of states, litigated divorces have equitable distribution laws for marital property. This means that the court assumes you and your spouse have an equal claim to all shared assets and then alters that assumption based on financial factors and other aspects of your marriage. Your separate assets remain yours, but you may end up with approximately half the marital assets.
In addition to having fewer marital resources, you also no longer have access to a shared two-person income. Divorce is also very costly, and you may face court costs, legal representation costs, and other fees.
Q: Does Divorce Affect a Beneficiary?
A: This depends on the circumstances. If a spouse designated a beneficiary for a marital asset, and the spouse no longer has ownership of that asset, the beneficiary may be affected. The other spouse may select a different beneficiary.
Typically, a beneficiary is not automatically impacted by divorce unless the separation agreement specifically states that there is a change in the designation. If one spouse has named the other spouse the beneficiary of certain assets, some states automatically revoke this inheritance after divorce. If you are unsure how a divorce will impact beneficiary designations of your assets or assets you stand to obtain, talk with a qualified attorney.
Q: What Is the Responsibility of a Father After Divorce?
A: After a divorce, both parents have a legal and moral obligation to provide their children with financial support. A divorce may include spousal support and will result in court orders for child support, child custody, and a parenting plan, all of which it is your responsibility to follow as a parent.
Whether you are paying or receiving child support or spousal support, it is your right and responsibility to do so. A parenting plan can outline the transportation, time frames, rules, and other specifics of raising your children with your ex-spouse.
Q: How Do I Protect Myself Financially in a Divorce?
A: When you enter a marriage, one way to protect yourself financially in case of a future divorce is a prenuptial agreement. You can also create a postnuptial agreement during your marriage. This can allow spouses to determine each person’s rights and responsibilities to assets and debts if they are divorced.
When you are in the process of divorce, one of the most effective ways to protect yourself financially is to get an uncontested divorce outside of court. This allows you more control over property division and support payments and also limits the extreme costs of a divorce.
Contact Stange Law Firm
There are many destabilizing and stressful changes after a divorce as a father. Reviewing and updating an estate plan can seem like simply another thing to manage, but it is incredibly important. Talk with an attorney to determine what important changes you should make to your estate plan.