As discussed in Part 1, neglecting estate planning may lead to assets that you secured with the divorce settlement being distributed to people and organizations that you do not desire after your death. Part 2 will discuss Naming a Guardian for Minors, Beneficiary Designations, and Powers of Attorney.
Naming a Guardian for Minors
For parents who have young children, one of the primary motivations for making a will is naming a guardian who would raise your offspring in the unfortunate circumstance where both parents have either passed away or been declared unfit.
Some parents have the opinion that their ex-spouse should not have custody. A letter can be attached to their will explaining the reasoning. However, unless there are certain facts and circumstances leading the court to find that the ex-spouse is unfit, the surviving parent will probably be granted custody.
Even though a will is intended to cover your most valuable possessions, some assets may not be included. Numerous assets fall outside of a will, and will go to beneficiaries designated on your banking and insurance documents. Thus, you should update your beneficiary designations for IRAs, 401(k)s, payable-on-death accounts, life insurance policies, and brokerage Transfer On Death (TOD) accounts at your earliest opportunity.
Qualified plans like pensions, life insurance policies provided by employers, and 401(k)s are federally regulated by ERISA (the Employee Retirement Income Security Act). According to ERISA regulations, plan administrators must provide the named beneficiary the funds from these qualified plans. Regardless of state law, your ex-spouse will receive ERISA funds if he or she is the named beneficiary upon your death.
Powers of Attorney
Integral to an estate plan, powers of attorney authorize a person to act for you and make decisions on your behalf should you be unable to. Typically, two powers of attorney are necessary; one for overseeing your financial matters and a second one for your medical needs. Many married couples grant each other powers of attorney. If this is true in your case, they must be revoked, and new documents must be executed.
Professional Guidance for Divorcing Individuals
John Faggio, CPA, CFP®, CDFA™, is a Financial Divorce Specialist. Faggio Financial helps divorcing individuals reach an equitable financial settlement in a professional, cost-effective, and expedient manner. Call (410) 988-7333 for professional guidance today.