Finalizing The Insurance & Estate Ties That Bind, Post-Divorce

Picture this: your friend, at long last, finalized their divorce and is ready to ride off into the sunset. Time for a cocktail (or mocktail)!

You can hardly blame them for their efforts to avoid any significant decision-making after the long process of negotiations, rulings, and compromises they just endured.

While many things can be put on the back burner post-divorce, severing insurance and estate plan ties should rank high on your friend’s to-do priority list. That isn’t to say that your friend needs to be knocking down the door of their insurance agent or attorney the day of their prove-up (read: the final day in court when the divorce is official), but typically, these are things that should be tackled within the first year, post-divorce.

Thinking Through Insurance

First, thinking through insurance, your friend’s divorce will most commonly affect their homeowners, auto, and personal liability policies, as they will be uncoupling their household and tangible items to start. Every situation is different, so there may be changes necessary to life insurance coverage, an art or jewelry policy, and it is imperative for your friend to keep health insurance top of mind.

Your friend will benefit by having their insurance broker apprised of their situation throughout their divorce, as their agent will be able to guide them through the process and alert them when a change needs to be made to their existing coverage. For example, if your friend or their ex-spouse moves out of the marital home, they will need new coverage – whether renters’ insurance or homeowners applies.

Estate Plan Updates

After spending many months to years and thousands of dollars to uncouple, your friend likely is eager to ensure their former spouse will not get any of the assets for which they negotiated so hard. Still, they may struggle to prioritize updating their estate plan.

Your friend’s estate plan is comprised of several legal documents, including their Last Will and Testament, Trust, Power of Attorney for Property, and Power of Attorney for Health Care. There may be more involved depending on your friend’s specific situation. These documents designate who has decision-making power in several meaningful situations.

For instance, if your friend can suddenly no longer make urgent health decisions for themselves, do they want their ex-spouse to retain that authority? Most likely, the answer is no. Beneficiary designations are also commonly overlooked but crucial to rethink post-divorce. How about the IRA your friend was savvy enough to negotiate in their divorce? Probably not something they want to leave to their ex-spouse solely because the beneficiary designation change was neglected.

Use an Expert

Making changes to your friend’s estate plan can seem a daunting task, but a well-qualified estate planning attorney will be able to ask the pertinent questions to make sure your friend’s wishes are met, all while making the process as smooth and pain-free as possible.

Tidying up their insurance and estate plan will help your friend enter their next chapter on sound footing. Liken it to organizing a messy closet or pantry, the task can seem insurmountable at the start. In the end, your friend will be glad they took on the project and will gain peace of mind that their finances are in good order.

Want to help your friend finalize their ties that bind? Be a sounding board for them as to who the best people are in their life to take care of their finances and family should something unexpected happen. If they need a recommendation for an estate planning attorney or insurance agent experienced with the nuances of divorce, connect them with our Divorce Practice Group at TheNextChapter@bdfllc.com