Many wealthy married couples in Massachusetts take the time to establish a comprehensive estate plan. Via estate planning, a couple can provide clear directives regarding end-of-life decisions related to the distribution of assets. A couple can also establish one or more trusts, account for long-term care matters and name beneficiaries for financial and retirement accounts. In cases where a couple subsequently divorces, it's important to update an estate plan accordingly.
While going through or upon emerging from a divorce, most individuals want a break from all of the personal and legal drama and simply want to move on with their lives. Consequently, some may put off or fail to address and make changes to important estate planning documents which could potentially have significant consequences.
Documents that may name an ex-spouse and should therefore be changed include a will, power of attorney, health-care proxy and beneficiary designations of one's financial, investment and retirement accounts. Updating beneficiary designations is especially crucial as such designations trump any changes made to a will so an individual's ex-spouse could inadvertently end up inheriting a sizable fortune.
In some divorces, a settlement may include provisions that an ex-spouse "remain a beneficiary of a retirement account or insurance policy." If this is the case, an individual would be wise to file updated paperwork naming an ex-spouse as the desired beneficiary after a divorce is finalized. Doing so is proof of one's intent and can deter other heirs or future spouses from taking legal action.
Additionally individuals who, via a divorce settlement, are entitled to a portion of an ex's retirement account assets would be wise to consult with their divorce attorney about obtaining a Qualified Domestic Relations Order. This document should be sent to an ex's estate plan administrator and serves are legal proof of one's claim to an ex-spouse's retirement assets.
Source: The Wall Street Journal, "After Divorce, Separate Your Estate Plans Too," Liz Moyer, Feb. 20, 2015