Divorce has a way of outdating even the best of estate planning documents. In fact, Kaitlin Pitsker observes in Kiplinger.com, outdated documents, beneficiary blunders and other estate-planning mistakes can tie your assets up in court for years, allowing taxes and legal fees to eat up a chunk of your estate, and giving inheritances to people you didn’t have a good relationship with or hardly knew.”
Pitsker cites singer Barry White as a case in point: When White died in 2003, he was separated, but not yet divorced, from his second wife, and she inherited everything. His live-in girlfriend of several years and her nine children received nothing, triggering a long, messy legal battle. The sidebar: the law considers you legally married until a judge signs the divorce decree. Nowhere in the Barry White story was there mention of a prenuptial agreement protecting either Barry White’s separate property – or that of his soon-to-be ex in the event of a separation or divorce.
Last week in our blog, we referred to Larry King, who executed a new will two months after filing for divorce from his second wife. Fact is, by definition, divorce is a signal that special – and immediate – attention be paid to making changes to each spouse’s estate planning documents.
Importantly, it’s not only money matters that must be dealt with in the process of divorce. Power of attorney documents need to be changed so that an ex-spouse won’t be the one making financial or medical decisions on your behalf if you’re unable to do so, Pitsker cautions.
Larry King’s handwritten will left more than $2,000,000 to his children. With no trust documents to both maintain privacy and control irresponsible use of the funds by any of his heirs, the “plan” hardly appeared to have been well thought out.
“Divorce is never an easy time. It can be a huge adjustment period for most people, but women, in particular, often find that they are affected most by the financial aspects of divorce,” observes. Stacy Francis, CFP®, CDFA®. Main divorce-time estate planning mistakes made by women include:
- failing to update their will
- failing to update their children’s guardianship plan
- failing to claim their share of the former spouse’s deferred savings plans such as 401(k) and IRA, and then changing the beneficiary designations on those plans.Divorce dictates diligence in updating estate plans!– by Ronnie of the Rebecca W. Geyer & Associates blog team