Why do I need to worry about estate planning in my divorce?

Updating an estate plan or creating a new plan after a divorce should be considered a standard part of getting divorced.

California spouses who are getting divorced have every reason to want the process to be over with as soon as possible. A divorce touches every part of a person's life and can be emotionally and financially draining. However, that should not let people rush through and ignore some very important things that could hurt them later. Estate planning is one of these things. Just how does estate planning connect with a divorce?

The fall-back plan

Everyone has an estate plan whether they know it or not. If a formal will or trust is not created, California's probate laws become the estate plan. In addition, beneficiary designations on life insurance policies, retirement accounts and more are also part of an overall estate plan. The reality is that it is always better for individuals to take matters into their own hands rather than relying on probate laws to do the job.

Start with the basics

For most people, a good place to start when designing an estate plan is to develop a will or a trust. The American Bar Association indicates that in addition to identifying who will receive what assets, people can also assign guardianship of minor children in these documents.

Determinations regarding such guardianship may need to be made in conjunction with the other spouse and, therefore, consultation with an attorney during the divorce will be important. Additionally, if children are set to inherit large sums of money or valuable assets, a trust can be a way of directing how the inheritance be provided to them or be used. This can help avoid a young person from squandering money out of immaturity.

Regarding assets, it will be important to make sure that all assets are properly retitled. This may mean into one person's name only if they were previously owned jointly. It may also mean transferring ownership to a trust.

Looking beyond wills and trusts

People should not think their estate planning is done once they have created a will or a trust. Who will receive other assets can be controlled by the designation of beneficiaries. Forbes explains that since most people identify their spouses as beneficiaries on retirement or life insurance plans, these may need to be updated after a divorce is over. However, it is important to check with an attorney about the specifics of a divorce agreement. Some agreements require one spouse to keep the other spouse as the beneficiary on a policy or plan.

Appointing decision makers

A part of estate planning is also about identifying who will have power to make what decisions should the person making a will or a trust become unable to do so. Powers of Attorney can be created for health care decisions, management of property and more.

Again, most people are not likely to choose a former spouse to hold these responsibilities but if existing documents provide such power and are not updated, the original plans will stand.

Working with an attorney during a divorce is an essential way for California residents to make sure that no important decision is overlooked.