There’s a lot of build-up to divorce. Like a slow trickle of uncertainty, questions like “How do I know when it’s time to leave a marriage?” soon lead to more concrete thoughts of “What will my financial life look like afterwards?” And then suddenly, after all the time and worry, it’s over. But without smart planning, there are plenty of items left on that to-do list. Most people focus on logistics like housing and co-parenting plans, while overlooking less urgent estate planning tasks. Let’s look at what some of these tasks are and how to tackle them.
As a certified divorce financial analyst, individuals engage me both before and after they sign their divorce decree. We encourage post-divorcees to work with a qualified estate attorney to draft documents, but our job as their financial CFO is to make sure all the items get taken care of.
Think about your estate plan. You might have a will that directs assets to a trust, but if your assets are titled jointly with rights of survivorship, this can lead to unintended consequences. Divorce is the perfect time to revisit and restructure your estate plan, making sure it aligns with your new reality and goals. Neglecting this step can lead to complications and unintended consequences in the future.
Steps to Take:
- Execute a new will.
- Designate new guardians for your children if necessary.
- Update your power of attorney documents.
Consider this: your estate includes illiquid assets like real estate. If your assets are primarily in real estate, your beneficiaries might inherit these assets without the liquidity needed to manage them effectively. Planning for this scenario means that your estate is structured in a way that minimizes potential conflicts and maximizes efficiency.
Steps to Take:
- Transfer ownership of all deeds for your homes, automobiles, boats, etc., and have them recorded at the appropriate county recorder or DMV office.
- Complete the process of refinancing or assumption of mortgages.
What about a trust? Trusts can be a powerful tool for managing your estate and making sure your assets are distributed according to your wishes. Trusts avoid probate, maintain privacy, and can provide control over how assets are distributed to beneficiaries. It’s important to work with an estate attorney to draw up trusts properly.
Steps to Take:
- Set up trusts to manage and distribute assets.
- Make sure trusts are properly structured to avoid probate.
Re-evaluating decisions about your future health is also important. Health care directives are essential for making sure your medical wishes are respected if you become incapacitated. These documents include living wills and durable medical power of attorney.
Steps to Take:
- Create or update your living will.
- Designate a durable medical power of attorney.
Now that you’re single, you must decide who your executor will be. Whether you choose your children, a sibling, or a close friend, you’ll want to make sure they can access all the important information. If you relied on your ex-spouse to handle most of the details, it might be helpful to start by gathering all your information in one place and storing it digitally. Many people store their online passwords in their heads or store their documents in multiple places, which can create difficulties for those managing your estate.
Steps to Take:
- Compile a list of all financial accounts, including investment accounts, credit cards, and safety deposit boxes.
- Include login credentials for online accounts, from social media to streaming services.
- Provide details of employment benefits and human resources contacts.
Post-divorce estate planning can be complex, especially when it comes to removing your ex-spouse as a beneficiary on your accounts and estate planning documents. Consulting with professionals such as financial planners, tax preparers, and attorneys can guide you through the process and make sure you’ve covered all your bases.
Steps to Take:
- Interview and retain the services of a Certified Divorce Financial Analyst (CDFA) and a tax preparer (CPA).
- Go over every detail of your Marital Settlement Agreement with your attorney and financial advisor to make sure everything is completed.
Divorce is never easy. But knowing how to handle the estate planning side of things after the dissolution of a marriage can help you move forward. If you’re finalizing a divorce or just want to talk through your options, please reach out.
Disclosures and Sources:
Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Bend Wealth Advisors is not a registered broker/dealer and is independent of Raymond James Financial Services.
Securities offered through Raymond James Financial Services, Inc., member FINRA / SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Bend Wealth Advisors is not a registered broker/dealer and is independent of Raymond James Financial Services. Any opinions are those of Awbrey Swanson and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP, CERTIFIED FINANCIAL PLANNER, and CFP (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
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