If you're going through the emotional and financial turmoil of divorce, then your estate plan is probably the furthest thing from your mind. But, once your divorce has been finalized, you need to take those estate planning documents out of the drawer and update them.
If you fail to do this, then if something were to suddenly happen to you, your ex-husband or wife could receive a significant share of your assets.
As divorce attorneys who, by the nature of our work, are in tune with our clients' financial situations, we know that a large portion of our clients' wealth is controlled by beneficiary designations. We're talking about any type of asset that has a beneficiary designation, including:
- Payable on death bank accounts
- Life insurance policies
- Transfer on death brokerage accounts
- Retirement accounts: IRAs and 401(k)s
Have cash in your bank account? Have a 401(K)? Have a life insurance policy? There's a good chance that you have a decent amount of money tied up in any one or more of these assets. Any such asset with a beneficiary designation passes outside of a will, and it is not subject to probate.
So, this means that even if you were to remarry, if you passed away due to an accident or an illness, if you never updated your beneficiary designations, a significant portion of your assets could pass on to your ex if their name is still on these documents.
Even if you remarry, don't make the mistake of assuming that state law would revoke any earlier designations that you made to your former spouse. In many cases, if your former spouse is still the beneficiary on any of your accounts, he or she will inherit those assets unless you update the paperwork.