Married couples often create joint estate plans. They share assets and family members, so they create plans together to protect their resources, their shared children and one another. Many married couples sit down together with an estate planning lawyer so that their shared documents protect both spouses or so that individual documents dovetail nicely.
When a marriage ends, each spouse will likely need to go back over estate planning paperwork to make major revisions. Some people may even need to draft entirely new documents. The average adult may already realize they need to remove their former spouse as a beneficiary of their estate, a trustee or an agent for their power of attorney paperwork.
However, there is another estate planning issue that quite a few testators overlook during or after a divorce. If they die without addressing this issue, their former spouse could potentially receive one of their most valuable assets.
They don’t update insurance paperwork
Life insurance can protect the people dependent on an individual. It can also be one of the most valuable aspects of someone’s estate plan. A life insurance policy could pay off someone’s mortgage and their student loans. It could help provide financial support for their minor children until they become adults.
Often, people name their spouses as the beneficiary of their life insurance policy. They may then overlook the need to update their life insurance when they modify other estate planning documents during a divorce. Life insurance payouts do not reflect the terms set in someone’s will but rather the beneficiary designation documents filed with the insurance company.
If the documents do not include the same terms, the paperwork filed with the insurance company determines who receives the life insurance payout after someone’s death. Therefore, in addition to updating wills, trusts and other estate planning documents, people also need to file updated beneficiary designation forms with their life insurance providers.
Those who overlook this step may not be able to protect their closest loved ones as well as they hope to if they die before their former spouse. This is just one of the ways in which identifying common estate planning oversights can help testators to avoid making consequential mistakes.