“When your marriage is put asunder, keep your finances whole,” Diane Harris advises in the AARP Magazine, offering 10 “commandments” on dividing assets, handling spousal obligations, and avoiding lawsuits.
At our Indiana estate planning law firm, we know that when a marriage is “put asunder”, even the most carefully drafted estate planning documents are “put asunder” as well. By definition, divorce is a signal that special – and immediate – attention be paid to making changes to each spouse’s estate planning documents. Because we are so often called upon to draft estate planning documents for an individual entering a second or third marriage, we know how important it is for the former estate planning to be updated in conjunction with the divorce.
Basic estate planning “re-do-during-divorce” areas:
- revoking the existing wills and trusts and creating new documents
- replacing the soon-to-be ex spouse with a new executor
- designating new beneficiaries and contingent beneficiaries on life insurance and retirement plans
- re-doing power of attorney and healthcare power of attorney documents
Besides all these considerations, in so-called “gray divorces”, there are additional planning issues:
- There are tax ramifications when IRA assets are being divided after distributions have begun.
- Social Security benefits (An ex-husband or wife may choose to – or have previously chosen to – receive benefits based on the ex-spouse’s contributions.)
- Health insurance coverage can be impacted by divorce. Even if both husband and wife were retired and receiving Medicare coverage, the amount one or the other pays for Part B and Part D premiums can be affected.
“Nearly half of all marriages in the United States end in a divorce or separation, but one group in particular is divorcing at a higher rate than ever before: people who are 50 or older,” Texas attorney Esther R. Donald writes. Trouble adapting to life without children, disagreements over finances, lack of intimacy, and finding more fulfillment in hobbies and activities outside the marriage are some of the reasons for “gray divorce”, she posits. Issues unique to divorcing at an older age include the needs of adult children and maintaining – or losing – relationships with extended family.
For later-rather-than-sooner divorce situations, new directives are needed.
– by Rebecca W. Geyer
