When people decide to divorce, they typically know it will impact many facets of their life. They have probably thought about how to handle child custody or who should keep a shared home, and they have likely made choices about other emotionally tied aspects.
What many here in Ohio may not consider is just how to handle the financial parts of their life in a divorce process. If this describes you, you might know that you should update several documents, but you may not know where to start. Fortunately, experts have advice to help you determine what to do.
Change your beneficiaries for your life insurance
The first thing that needs to change is the beneficiary on your life insurance. If the designation remains your ex-spouse, he or she will get any payouts after your death, even that wasn’t what you wanted. Experts also point out that you should check these every year anyway as a rule of thumb.
Another factor to consider with life insurance is whether your ex is paying you support. If that is the case, you may want to include a provision in your divorce decree that says your spouse must have life insurance that names you as the policy owner. Owning the policy means that you must be made aware of any changes.
Change beneficiaries for your retirement accounts
If you have an IRA, you can actually name anyone as the beneficiary and do not need spousal approval to do so. Just like with life insurance, you have to initiate a beneficiary change. This is especially important if you decide to marry someone else after your divorce.
Retirement plans are a bit different as spouses are the automatic beneficiary, unless otherwise indicated by your spouse. Some people think that they can get around this by listing it as a provision of a prenuptial agreement, but that is not the case since people sign prenups before getting married, and marriage automatically makes a spouse the beneficiary of a retirement account.
Other documents and accounts
After those two main categories, you should update any other documents that pertain to your estate plan, such as power of attorney or your will. It is important to honor your wishes in the event of your death, especially if that means you do not want to leave any of your estate to an ex-spouse. Other financial accounts are also important to change. You should update “transfer on death” accounts to reflect your wishes.
Most people don’t enjoy thinking about the end of their lives, but it is important to consider whenever you have a significant life event, such as a divorce. Don’t make the mistake of assuming that your accounts and documents will be automatically updated when you pass on. Ending your marriage will take patience and diligence, but it is a worthwhile process in order to start your new future.