Having a comprehensive estate plan in place is essential for all adults. This is true regardless of the value of your estate or your age. If you have an estate plan in place you are ahead of the majority of Americans; however, you shouldn’t stop there. Updating your estate plan when certain life events occur is just as important as creating the plan in the first place. Divorce is a prime example of this. You will need to take the time to update your estate plan should you’re marriage come to an end. It is particularly important that you update your beneficiary designations. A better understanding of why it is so important to update your estate plan when you divorce will hopefully help ensure that you take the time to do so.
Why You Should Update Your Estate Plan When You Divorce
A comprehensive estate plan typically includes much more than just a Last Will and Testament. One of the primary goals of an estate plan is to provide for your loved ones in the event of your death. Because of this, beneficiary designations are an important part of your estate plan. If you are married, chances are good that you will list your spouse as the primary beneficiary of any retirement accounts you may have. However, what happens if you get divorced? If your response is that the divorce will take care of changing those designations, think again.
Divorce Decrees Won’t Handle It
The thing about a divorce decree is that certain laws actually override that decree – or ignore it altogether. Certain retirement plans, for example, are governed under the Employee Retirement Income Security Act of 1974, or ERISA. These plans must follow specific rules and provisions. ERISA provisions almost always override the provisions in a Marital Settlement Agreement. This is true unless the couple also included a Qualified Domestic Relations Order, or QDRO, in the settlement.
In practical terms, this means that you could reach a Marital Settlement Agreement with your spouse that specifically states your spouse is not entitled to any benefits from any of your retirement accounts. However, your spouse may end up with the account assets anyway if those accounts are governed by ERISA. If you failed to change you beneficiary designation after the divorce, they could receive these assets upon your death.
This is but one example of why it is so important to take the time to review and revise your estate plan following a divorce. You cannot count on the terms of the Marital Settlement Agreement and/or Divorce Decree to take care of any issues that might impact your estate plan.
If you have additional questions or concerns about your Texas estate plan, contact the experienced Texas estate planning attorneys at The Mendel Law Firm, L.P. You can call us at 281-759-3213 to schedule your appointment today.