Splitting heirs - Estate planning after divorce
Dissolving a marriage is undeniably tough, regardless of the circumstances. Your focus is on getting through one day at a time, rather than planning for what could happen in the future.
It’s easy to overlook the importance of reviewing your estate planning when you’re overwhelmed by the endless paperwork created by splitting assets, resolving debts, restructuring property, negotiating custody, and finalising financial support.
Many people assume that a separation or divorce automatically voids legal documents prepared during a marriage. That’s not the case. So if your ex-spouse is the last person you want to give your assets to when you die – let alone be responsible for a life and death decision on your behalf – you need to get onto it…fast!
Here are a few things you should consider:
Update your will
While you are separated (not yet legally divorced), your existing will is still valid and will be enforced. So if you pass away, your ex-spouse will still receive everything you had intended when you were happily married. That often equates to almost everything you own.
Divorce affects your will differently depending on where you live in Australia. In some places, divorce automatically makes your will invalid. In others, any provisions or gifts for your ex-spouse in your will become void. Even though your ex-spouse is excluded (which may be one of your key objectives) it changes the distribution of your estate in a way that you may not be happy with.
It’s often best to make a new will clearly stating your wishes for your estate.
Appoint a new Executor
If you had nominated your ex-spouse as the Executor of your will, this nomination also becomes void on divorce. Without an Executor, the Court will appoint someone to administer your estate, which could mean your estate is not handled in the way you wished. Wouldn’t you feel better knowing that someone you trust will be responsible for winding up your personal affairs?
Rethink your beneficiaries
When you set up many of your assets, you would have been asked to name a beneficiary – the person you would like your asset to be paid out to in the event of your death. It’s likely that you nominated your ex-spouse, so it’s time to change it. Start with your superannuation and life insurance, then check with your financial adviser if there are others that need attention.
Delegate a new power of attorney
It’s also important to change your power of attorney nomination if it was previously allocated to your ex- spouse. Your power of attorney may make decisions on your financial, legal and health matters if you can’t make them yourself. Delegate this power to someone you trust – a parent, friend, sibling, or an adult child.
Divorce is never easy
When it feels like the world as you knew it has collapsed around you, you might find comfort in restoring order to the foundations of your future. There’s nothing more important than protecting yourself, your children, and any others who depend on you.
Your financial adviser can help you with your estate planning. However, you should also consult a legal adviser.