New York Estate Planning & Elder Law Blog
Many experts in estate planning focus on the financial planning that must be done while going through a divorce. However, there are separate money matters to consider once the divorce is finalized. You will need to close the loop on any outstanding financial matters that result from the separation. The following are areas that should be looked at to minimize any problems that could arise in the future.
Beneficiary Designations
Some accounts do not automatically pass to heirs in an estate. Retirement accounts, life insurance, and other assets that require a beneficiary designation pass along everything into the account to the person that is named. If your former spouse is named as the beneficiary to these accounts, that spouse will take those assets even though you are no longer married.
While some states do have laws that revoke a will upon a divorce, failure to make the changes to beneficiary designations in the states that do not will mean that the assets will pass to the former spouse. Changing a beneficiary designation is an easy process that can be accomplished by completing a simple form with the institution that controls the asset.
Other Estate Documents
You should also review and amend any other estate planning documents, including any living trusts, wills, and durable power of attorney if your former spouse is named in any of those documents. In addition, if you have named your former spouse as a healthcare proxy in case you become medically unable to make your own decisions you should have that document updated, as well.
In order to change a durable power of attorney or healthcare proxy, you must revoke and amend it in writing. Sign the revoking document and send it to your former spouse in addition to any institutions that have a copy of the paperwork. You should request that your former spouse also send the old copy of the power of attorney, too, before executing the new documents.
Check Your Credit Report
Once you are divorced, all joint bank accounts should be closed. This includes credit cards, bank and brokerage accounts, mortgages, car loans, and home equity lines. Review your credit report to see if there are any “open” credit cards, mortgages, or debts in both of your names. If there are, close them. If there is an outstanding balance on any joint accounts, instruct the lender to suspend the account to prevent future charges and confirm that the account cannot be reopened or unsuspended.
In addition, you should review your credit report annually to be sure that no other credit cards or other liabilities have been established in your name without your knowledge. If you spot any errors or potential liabilities you should contact the credit bureau immediately.
Compare Earlier Financial Projections with Reality
During your divorce, you most likely came to the realization that your financial outlook would be different. Once the divorce is complete, it is important to check the assumptions that you made with the realities of your financial outlook. Be sure to check on your financial targets every three to six months to ensure that they are still on target.