So Dick and Jane got divorced. Jane has the kids on a primary basis with Dick having visitation. Before they each settle back into their own lives, each one of them has some important “I’s” to dot and “T’s” to cross related to their respective estates.
First and foremost, Dick and Jane should each immediately update their life insurance policies, 401k policies, IRA policies and any other benefits or plans wherein a beneficiary has been named. Their divorce may require them to name each other as the beneficiary (or a trustee beneficiary for the children) for a certain amount. If so, that provision should be followed. However, all other policies and accounts need to be immediately updated. If, for example, Dick were to die and Jane was still listed as the beneficiary of a life insurance policy or IRA, the policy or account is going to pay out to her.
The second thing each needs to do is update their Wills. In the instance where a party has a Will executed while married, but then gets divorced, the Will is not revoked. However, the spouse is treated as predeceasing the maker of the Will. This is a safety net for the parties in the event that they do not update their Wills and avoids the draconian consequences seen with life insurance and the like, but the situation is still rife with potential problems. First of all, the Wills created as a married couple probably created a Guardian for the children and a person to serve as Trustee over any money left to the children. Either person may wish to revisit that decision. If the parties had named Jane’s sister while married, Dick may want to change Trustees of money he leaves to the children to someone from his own family. As for the Guardian, the opposite spouse would be the presumptive guardian of the children if one of them died. However, when that second spouse died, the Court would make a decision based on the person appointed in that spouse’s Will. It is imperative that each side make an expression as to whom they would wish to have in that role.
Thirdly, both spouses need to make a note about their tax status and future filings. The parties have probably been filing joint returns. Now as separate tax filers, they are no longer both benefitting from certain deductions. One spouse may be able to file head of household, one may have the dependency exemptions over the children and one of them may have the mortgage interest deductions. If one is paying alimony to the other, it may be tax deductible to the payor and taxable to the payee. Both Dick and Jane may want to speak with their CPA and tax preparer to review their withholding status and also to plan to set money aside for future taxes.
Lastly, Dick and Jane may want to start a diary or journal of the various dates, deadlines and obligations arising under the decree. It might be beneficial to keep a calendar regarding the dates visitation and parenting time is exercised and the dates when it is swapped. Each side may wish to keep a log of any disputes and of the other parties’ attendance at the children’s events, activities, conferences and the like. Often times parties will act like this sort of journaling is unnecessary under the belief that “We are getting along and working together, so I don’t need to arm myself for future court.” Those parties are well-served to remember that the couple also exchanged wedding vows which contained a host of promises and commitments, yet wound up in a divorce. Life changes and situations certainly present themselves which neither party anticipated. It is better to be ready than to be caught off-guard and guessing.