As you navigate the process of divorce, there are many important steps to take to protect your financial future. A key part of this preparation involves establishing a new estate plan. You’ll need to designate your own beneficiaries, reorganize your assets, and create a comprehensive plan that reflects your new circumstances.

It’s essential to consult with a qualified attorney to ensure your estate plan accurately represents your wishes and safeguards your assets. Strategic division of joint assets is crucial to avoid potential pitfalls, such as bearing a disproportionate tax burden while your ex-spouse enjoys the benefits.

Below, I’ve outlined some critical aspects of estate planning to consider after your divorce. Keep in mind that divorce often brings significant changes, and you’ll want to work closely with an attorney to protect your interests in your new financial structure.

Designating Your Beneficiary

During your marriage, your spouse was likely the primary or sole beneficiary of your estate. After your divorce, it’s vital to update the beneficiaries on all your accounts and documents.

Be aware that federal law, specifically ERISA (Employee Retirement Income Security Act), overrides state laws that might automatically remove an ex-spouse as the beneficiary of retirement plans. If you no longer want your ex-spouse to be a beneficiary, you must actively remove their designation.

However, keep in mind that your ex-spouse may still be entitled to a portion of the retirement benefits you accumulated during the marriage. It’s important to consult with an estate planning attorney to determine the exact division of these assets.

Dividing Your Assets

During the divorce, you and your ex-spouse will work to divide your joint estate. Here are some key categories of assets you will need to consider:

1. Appreciated assets, such as mutual funds and stocks
2. Real estate, including investments, mortgages, and insurance
3. Personal property, including jewelry, artwork, and other valuables
4. Retirement plans, such as IRAs and qualified plans
5. Your home, which can be divided in various ways to meet both parties’ financial needs

Creating a Trust

Many individuals establish a trust to ensure that their assets are managed and distributed according to their wishes. Here are three types of trusts you might consider:

1. Revocable Living Trust – This allows you to bypass probate and ensures your trustee can distribute your assets as outlined in your instructions.
2. Children’s Trust – This designates funds for your child’s future needs, such as education or housing.
3. Irrevocable Life Insurance Trust (ILIT) – This enables you to distribute life insurance proceeds in a tax-free manner, specifying when and how the benefits will be distributed, even long after you’ve passed.

Final Thoughts

Divorce is rarely a simple process, particularly when it comes to dividing assets and managing estate plans. It’s a complex and often lengthy procedure that requires careful attention to tax implications and asset division. Consulting with a qualified attorney is essential to ensure you’re making informed decisions and securing the best possible settlement.

Remember, the financial landscape after divorce will look very different. By working with a knowledgeable estate planning attorney, you can protect your assets and ensure that your estate plan aligns with your new life.

Please take advantage of a free informational live webinar or a 1 on 1 private consultation (via Zoom call) that I have arranged for my readers with our preferred Estate Planning professionals. Click here to learn more about how you can avoid probate and register for the zoom call (information only). Use referral code Kevin Byrd Stockton Mobile Notary.(I may receive a commission for any purchase you make with Premier Estate Planning)