Have A “Divorce Firewall” Strategy
“Five Divorce Disasters” is a review of common divorce disasters that can crush your estate plan and be avoided.
A 50% divorce rate is an unfortunate statistic in our current society, and, unfortunately, many people fail to handle divorce properly resulting in a lot of unintended consequences. These negative results go far beyond simply delaying divorce or not getting everything you are entitled to in the divorce process, they go much further than people expect. Avoid getting screwed in a divorce;
Here are the Five Biggest Divorce Disasters
- Not doing a Premarital Agreement and other steps: Getting into a long-term relationship with someone else, including marriage, is viewed by many as a wholly romantic process. If you love them, then everything is supposed to just take care of itself. Reality hits hard and people only realize after the fact that marriage is a legal and financial contract, and courts don’t adjudicate matters of the heart; just alimony, child support and custody, and asset division. A premarital agreement, which should be viewed as a strategic plan for the marriage, along with other agreements and techniques ahead of time can ensure a smoother divorce if not outright save the marriage from even happening if you find you are not really compatible.
- DIY divorce: The “do-it-yourself” divorce is extremely popular but grossly insufficient when it comes to actually untying you from a spouse. All it really does, at least in North Carolina, is legally separate you from the marriage so you can get remarried without it being bigamy. This quick process where you can get the paperwork online through the court system does nothing to divide up assets or other important matters regarding winding down the marriage.
- Not executing changes agreed to in divorce: Even when people use attorneys to go through the divorce process, agree to all of the property division terms, and go their separate ways, the property issues are often not settled. This is because they agreed one party would receive a certain joint account, but they never handled the paperwork with the bank. They agree that they each keep their retirement accounts and name beneficiaries of their choice. And, the most common one, they agree that they can name different beneficiaries on their life insurance. However, if these details are not actually carried out, then a second spouse may end up screaming and yelling at a life insurance agent because their recently deceased spouse may have never completed the forms so the ex ends up inheriting hundreds of thousands of dollars from the life insurance proceeds.
- Not changing health care documents and leaving former spouses/in-laws as agents. Some states have enacted laws that take the former spouse out of the list of agents in a health care power of attorney after a divorce, but I haven’t heard of any state automatically removing a brother- or sister-in-law or the ex’s best friend. Failing to update the health care power of attorney can literally put your life in the hands of someone who now hates you because of the divorce. It is always best to update all of your healthcare documents to reflect changes after a divorce.
- Not creating or updating your estate planning documents: It’s much more common with a Last Will and Testament not being changed after a divorce, but it can also happen with trusts. While state law may exclude a former spouse as a beneficiary and even as an executor/trustee, that also doesn’t hold true for other beneficiaries. It is extremely common for married couples without children to leave everything 50/50 to the nephews and nieces on each side of the family as contingent beneficiaries. They would still be beneficiaries if you didn’t change your documents post-divorce. While you may still want those former nieces and nephews to inherit half of your estate, most of my clients would instead want all of their estate to go to their side of the family.
Divorce is difficult enough for someone to go through, and the potential loss of time, money, and mental well-being is great. However, managing the divorce (and even the marriage ahead of time) the right way and handling all of the details can go a long way to avoiding even more unnecessary grief.
For a fuller video breakdown of these five disasters and to avoid getting screwed in divorce, check out the YouTube video here:
https://youtu.be/ayZFHGzN-1Q, and please subscribe to the YouTube channel so you don’t miss out on upcoming videos by clicking here: https://youtube.com/nclawyer?sub_confirmation=1