Having a comprehensive estate plan in place is essential for all adults over the age of 18, regardless of the value of your estate. If you have an estate plan in place, you are ahead of the majority of Americans.
But don’t stop there! Updating your estate plan when certain life events occur is just as important as creating the plan in the first place.
For instance, if you go through a divorce, you need to take the time to update your estate plan, particularly 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 should your marriage end in divorce.
A comprehensive estate plan typically includes more than just a Last Will and Testament. Because one of the primary goals of an estate plan is to ensure that your loved ones are provided for in the event of your death, beneficiary designations are an important part of your estate plan. If you are married, it is likely that your spouse is the primary beneficiary of any retirement accounts you may have. What happens though if you get divorced? If you think that the divorce will take care of changing those designations, think again.
There are certain laws that actually override the terms of a divorce decree – or ignore it altogether. Certain retirement plans, for example, which are governed under the Employee Retirement Income Security Act of 1974, or ERISA, must follow specific rules and provisions. ERISA provisions always override the provisions in a Marital Settlement Agreement 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, but if those accounts are governed by ERISA your spouse may end up with the account assets anyway upon your death if you failed to change the beneficiary designation after the divorce.
This is only one example of why it is so important to take the time to review and revise your estate plan following a divorce instead of counting 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 estate planning attorneys at The Mendel Law Firm, L.P. by calling 281-759-3213 to schedule your appointment today.
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