Getting divorced often has big implications, but there are so many ripple effects to consider when it comes to divorce. Not only does it affect the present but it affects your future as well – more specifically your estate planning.
Let’s take a closer look at how divorce affects your estate planning and how you can protect both your future financial and physical health.
Why Look At Estate Planning When You Divorce
Just as it is important to revise your estate planning after a marriage, the birth of a child or any other important life event, divorce or separation will also have an equally significant impact on your estate planning.
Many people do not realise that their will becomes automatically invalid when a divorce order is made.
Revising your estate planning when you divorce will safeguard your assets and ensure that your children will be cared for and your assets are inherited by the people you’ve specifically designated. That becomes even more important when there are children from a previous marriage to consider.
It is however imperative to obtain legal and financial advice from an experienced estate planning lawyer, as estate law can be fairly complex, and different states in Australia apply different laws regarding wills and divorce.
How To Review Your Estate Planning When You Divorce
Update Your Will
Most couples in Australia need to be separated for a minimum of 12 months before applying for a divorce. It is therefore imperative to update your will as soon as you’ve separated, and not wait until the divorce is finalised. Otherwise your ex-spouse could still end up inheriting your estate if they were named as the beneficiary and you were to pass away.
The same applies if your ex-spouse was listed as your executor. He or she would be obligated to administer your estate should you pass away.
If you change any beneficiary or executor, the changes also need to be communicated to the previously designated individuals. You will need to revisit your will after your divorce has been finalised.
Update Your Advanced Health Directives
If you have any advanced health directives in place and your ex-spouse has power of guardianship, you need to change that as soon as you separate.
Otherwise your ex may still be entitled to make medical decisions on your behalf, in the event of you becoming ill, seriously injured or incapacitated.
Update Your Power Of Attorney
If necessary, update your Power of Attorney as soon as you separate, to ensure that someone you trust will protect your interests and make financial and legal decisions on your behalf, should you become physically or mentally disabled.
If you do update your Power of Attorney, the previous person must be officially informed.
Review Your Life Insurance Beneficiaries
It is fairly common for most married couples to list their spouses as beneficiaries of their life insurance policies.
If this is the case for you, you would need to review your life insurance policies and beneficiaries as soon as you separate too.
It is always recommended to have a binding beneficiary nomination for any insurance policies you have, to ensure that the person you want to receive the funds actually get them.
Review Your Death Benefit Nominations on Superannuation
Some people may not be aware that superannuation does not form part of the estate and is not usually covered under the terms of a wills, regardless whether the fund is self-managed.
You do however have the choice of listing your nominated death beneficiaries with a binding death benefit nomination. Alternatively you may be able to instruct the fund manager to transfer the funds to your estate, upon which they will then be distributed according to the terms of your will.
Review Joint Assets & Liabilities
If you and your spouse have any joint assets and liabilities, they also need to be reviewed as soon as you have decided to separate.
Such assets could include the family home, other properties, businesses, bank accounts and any item of value, while liabilities include a mortgage or private loan and all debt including credit card debt. Remember to notify the banks of any changes to your accounts.
This task will form a major part of your divorce settlement.
Review Trustees & Beneficiaries For Family Trusts
If you have a family trust in place, you need to consider whether any of the trustees are still the best-suited candidates to manage the trust. Should you wish to change any, remember that they have to be officially notified.
Trusts can be extremely complicated at times and to avoid any possible future lawsuits against your nominated beneficiaries, it’s best to seek legal and financial advice before making any changes to a family trust.
Do you need help with your divorce? Got questions about how divorce affects your estate planning? Get in touch with our family lawyers in Perth at Hickman Family Lawyers today for a free 15 minute information call now.
