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Make Estate and Financial Planning a First
Step After Divorce
After a marriage breaks up, about the last thing most people
want to do is sit down with one more attorney. But no matter how
old you are or whether you have kids, it's important to consult
both financial and legal experts to make sure you have an
updated estate and financial plan for your new life once the
divorce decree is final.
It's also best to blend estate planning with financial
planning post-divorce. If you weren't working with a financial
or estate planner during the divorce process, it's time to do so
now. The immediate months after a divorce can be disorienting —
even if you don't move, you are literally starting a new
household that you will have to direct yourself, and that means
new money issues to face.
This is why the weeks immediately after a divorce are a
good time to revisit short- and long-term spending and planning
goals. Here's a general roadmap to that process:
Start with a financial planner. Whether you plan to
stay single, remarry or move in with a new partner, it's good to
get a baseline look at your finances as early as possible after
the divorce is final. Expenses for the newly single can pile up
quickly and unexpectedly, and a financial planning professional
can help you review your new current spending and savings needs,
compare strategies to achieve long-term goals like college and
retirement and give you critical tools to protect your assets
and loved ones if you die suddenly. Even if you have a good
relationship with an ex-spouse and you addressed key issues for
your children as part of the divorce proceedings, you need to
revisit all these issues as a single individual before you move
on to the next stage.
Talk with a trained estate planning attorney about wills
and other critical documents. True, there are software
programs and other kit solutions available to write basic wills,
powers of attorney and certain simple trust agreements. But it
makes sense to coordinate the activities of a financial planner
with an estate planning attorney who can tailor an overall
estate plan specific to your needs no matter how basic they
might be right now. Even if you are very young with few assets,
it makes sense to get some solid advice in this area so you'll
be able to manage such planning as you age and your finances get
more complex. Particularly if you have kids, such planning is
important if you plan to remarry and if you want to guarantee
that specific assets are guaranteed for them when you die. In
some cases where a spouse dies unmarried with minor children, an
ex-spouse might automatically gain control of assets that were
supposed to be earmarked for the kids. If you don't want that to
happen, you need to plan for that legally.
Make a guardianship game plan for your kids. It's not
enough to plan how money and assets will go to your children if
you or your ex-spouse die suddenly or are incapacitated. If your
children are minors, it's particularly important to make sure
you and your ex-spouse have a guardianship plan for their
upbringing as well as any assets they may inherit. You might
completely trust your ex-spouse's new husband, wife or partner
to raise your kids if your ex-spouse dies before you, but there
may be others better-equipped to do so — spell that out now.
Also, if there are any trust or wealth issues that will become
effective for your children once they reach adulthood, it's also
important to establish an efficient legal structure for
distributing those assets as well as appointing a trustee in a
will to train and guide your kids through that financial
transition.
Plan for special needs kids. If one of your children
is disabled and is expected to need lifetime assistance of some
type, then you should consult a qualified attorney to help you
create a special needs trust. It will help protect your child
from having to give up any public or social financial assistance
as well as access to special doctors, medical help, special
prescriptions or treatments that could be taken away if they
were to personally inherit assets that would disqualify them for
these programs. When such assets are held in trust, they are not
counted as the child's assets. The advantage is that those
inherited assets may still be used to support their housing or
other personal living needs.
Get solid protection in place. Most people focus on
what may happen to their health insurance if they get divorced,
but insurance issues like life, property/casualty and disability
insurance are sometimes put on the back burner. If you're newly
single, you definitely need the best health coverage you can
afford for yourself and your kids, but life, property, liability
and disability insurance become doubly important, particularly
if you failed to address those needs during the divorce. Even if
your ex-spouse is cooperative with financial support, it's wise
to insure yourself as if they weren't. A financial planner
should be able to go through those options in detail.
Review all your investments for primary ownership and
beneficiary information. Even if you were advised correctly
to change the names on assets you and your spouse were dividing
between yourselves, it still makes sense post-divorce to review
that the names are indeed correct on those assets, and most
important, to make sure all beneficiary information is correct.
October 2008 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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