Older adults navigating a gray divorce often focus on the financial complications of ending a marriage. They worry about preserving retirement savings, protecting their home and keeping their costs as low as possible. What they may overlook is the need to make certain estate planning moves as a result of their changing marital status. Estate planning updates go hand in hand with divorce proceedings, especially as people approach their golden years.
There are several crucial estate planning moves that people typically need to make after a gray divorce. The three changes below can help ensure that a newly-single older adult has appropriate support and leaves a meaningful legacy after they pass.
Correcting testamentary documents
Estate plans frequently include spouses in positions of authority and as beneficiaries. One spouse may leave a significant portion of their estate to the other in their will or trust. They may even put their spouse in a position of authority, such as naming them as their co-trustee. It is typically necessary to modify testamentary instruments to remove all references to a spouse. That way, they do not have an interest in the estate and are not in a position to assume authority over someone’s resources after their passing.
Creating powers of attorney
Without a spouse, an adult does not have someone to advocate for them in a moment of hardship. Their finances could be vulnerable, and they are at risk of medical professionals making decisions about their care that do not reflect their medical preferences or personal values. Powers of attorney can grant authority over medical and financial matters to another person who acts as the agent or attorney-in-fact for the principal who drafts the documents. Those without a spouse to support them often need to find support from other people in case of an emergency.
Updating life insurance
All too often, those updating their estate plans focus solely on the documents they draft with a lawyer and not on assets that may be important to their legacy. People typically need to update the beneficiary designations attached to life insurance policies after they die. Simply naming a new beneficiary in an estate plan is not sufficient to change who actually receives the proceeds from the policy. If prior estate planning efforts included adding transfer-on-death designations to financial accounts or real property holdings, recently-divorced individuals may need to update those documents as well.
Reviewing an estate plan while going through a gray divorce can help a spouse determine what changes they specifically need to make. The right modifications can help people obtain protection for themselves and leave a meaningful legacy for those with whom they still have positive relationships.