Divorcing? Your estate plan should change.
Most people give a lot of thought to their estate plan. After all, what could be more important and more personal than how you wish to distribute your assets when you die, and who will act on your behalf in financial and health matters if you’re incapacitated?
And yet, many people are confused about how ones Estate Plan should be changed in case of a divorce.
Here’s how divorce should impact your estate plan:
Being separated from your spouse does not change your will.
Despite having separated … despite having a Separation Agreement …despite even starting divorce proceedings … gifts in wills to spouses who are separated (but still technically married) or to former common-law spouses remain valid and can generally only be revoked by executing a new will or codicil removing the gift.
Why you need to update your will after divorce.
“It is critical to have your will reviewed by a professional after divorce. And it’s a lot more than removing gifts to your ex-spouse”, says Educators’ Senior Financial Advisor Ed Gougeon. Take this case, for example: A young woman was dealing with her divorced father’s estate, and in his will he left everything to his two kids. However, when he had divorced years ago, he didn’t change the beneficiary designation on his RRSP. He left the designation as his ex-wife. As a result, not only did the ex-wife receive the RRSP, but the rest of the estate was going to be used to pay the tax on it. Sound unfair? Neither the will nor the divorce judgment changed the beneficiary to the RRSP… so the law assumed the father still wanted it that way.*
As an educator, you know the value of thinking ahead and being prepared, because it’s what you do at work. You need to plan for how you’ll provide for those you want to, or are legally obligated to, support. Ask yourself: How would the lives of my children change if my ex-spouse, myself, or both of us can no longer support them? If you are sharing responsibility for your children with your ex-spouse, you will each need a will with your wishes for your children’s care and support. If you’re supporting your ex-spouse, what will happen to them if you die? (Note: some divorce agreements require you to get life insurance to replace your support payments.)
Your powers of attorney need to be changed, too.
Your power of attorney documents name those who can make financial decisions or decisions relating to your health when you are unable to do so. (You can read more about the importance of a power of attorney in The Learning Centre.) If you, like many married people, have named your spouse as your power of attorney, you will probably want to change this.
Your Estate Plan should be updated to reflect any major life change. Don’t leave your final wishes to chance.
The best tip? Take advantage of professional expertise.
The financial specialists at Educators Financial Group are here to guide you through the changes that need to be made. Contact us today.
This information is provided for informational and educational purposes only. It should not be treated as legal advice. If you require legal advice, contact a lawyer.