Update Finances after Split

    Too many divorced people -- especially parents -- put off estate planning or skip it entirely. Many are simply uncomfortable talking about anything that relates to their death, financial or otherwise. After all, things are rough enough with a divorce on your hands. But if you've known anyone who died without a will, or failed to update their instructions after a change in family circumstance, such as a divorce or remarriage, then you have seen the heartache -- and the headaches -- that lack of planning can cause. 


“A will is very important, especially in the event of a divorce,” says Jeffrey Leving, a Chicago-based attorney and founder of the Web site DadsRights.com. “You have to know you are protected and the kids are protected. An irrevocable trust is a also a good idea – that means although the father can’t touch the money, which transfers to his children, it guarantees than any creditors can’t get at the money, either. In a divorce, creditors pop up all over the place, so it's important to protect your assets and a will and an irrevocable trust are great ways to do that.”

Without a will, Leving adds, the state you reside in takes over, and the estate will proceed to probate, which on average lasts nine months. This would tie up the financial resources for the remaining family during this period. The time lag might place undo financial hardship on any children, and family members who depend on you for financial support.

If there are no children involved, the divorced individual might like to direct their assets to family members, friends or a charity, certainly not to the ex-spouse. If the divorced individual remarries and still hasn’t amended his or her will, further headaches can arise. Should they die, the new spouse is generally entitled to one half of the deceased spouse’s estate -- thus effectively disinheriting the children. The new spouse may not be the caregiver of the children either, and therefore the money won’t go to your kids, who need the financial support the most. So yes, the stakes are high.

Yet, a will is often one of the first things that people overlook, says Jody D’Agostini, a certified financial planner at AXA Advisors’ in Woodbridge, N.J. “The downside is that ignoring a will could be of great consequence should one die before the assets have been redirected,” says D’Agostini. “The will controls where one’s assets go upon death.  With all the emotional turmoil of divorce, the divorcees often move on and forget to address this important issue. The result can be that your ex-spouse gets an unexpected windfall upon your early demise or your children’s financial future is being controlled by a court appointed stranger.”

Typically, the spouse receives or inherits the property that a will can control, so the instructions on a will need to be addressed and amended. “Wills, health care proxies and powers of attorney should be looked over by a lawyer to be sure that all intentions are considered and new situations are addressed,” says D’Agostini. “Of particular importance is guardianship of minors in the event of death and health care directives in the event of disability. “