In Texas, the end of a marriage closes a few doors and opens a few more. One lifestyle usually ends, and another begins. Most people obviously end up thinking a lot about the emotional issues and the agreements and court orders regarding spousal support, child support, child custody and property division. Anyone going through divorce, though, should also think about updating one other significant financial plan -- the estate plan. To prevent property disputes after death, the newly divorced spouse should make sure to specify what happens to properties and assets when the person dies.
An ongoing case in another state is a good example of what can happen if arrangements are not changed. The family of a woman who died in 2010 is now battling her ex-father-in-law over control of a house worth $200,000 even though she divorced her husband in 2007. The reason? The woman died without removing her ex-husband from her 1996 will. The house had been in her family for generations.
More than estate-planning documents need to be considered. Health-care plans, insurance plans and retirement plans should also be updated to avoid any later confusion. Other documents also need to be reviewed -- and revoked or revised, if necessary -- including power of attorney, health-care proxies and even the name of the person who will make or carry out funeral arrangements. Some of these documents can simply be destroyed.
Two years ago, the U.S. Supreme Court failed to overturn a lower court order in favor of a man's ex-spouse because he did not change beneficiaries after their divorce. The ex-wife received nearly $125,000 in life insurance that he probably intended for his second wife.
For some people, ex-spouses can remain as beneficiaries, but new beneficiary forms should be completed and filed with the appropriate insurance company.
Source: The Wall Street Journal, "After Divorce, Separate Your Estate Plans Too," Liz Moyer, Feb. 20, 2015