If you and your partner are getting a divorce, you have to do a lot of planning. You will need to choose your own beneficiaries, set up your own estate, and organise how your assets are split up.
You should talk to a good lawyer about the details of planning your estate to make sure that your wishes are carried out the way you want. You need to know how to divide your joint estate in the best way possible so that you don't end up paying all the taxes and your partner gets to enjoy your assets.
I've told you some important things to think about when making plans for your estate after your divorce. Please keep in mind that divorces can give people a chance to start over. You should talk to an experienced lawyer about how to best protect your new estate.
Choosing Who Will Get What
During your marriage, your spouse was probably the only or the main recipient of your estate. After getting a divorce, it's important to name a new beneficiary on all of your accounts and documents.
State laws that automatically remove an ex-spouse as the beneficiary of retirement plans are overruled by ERISA, a federal law. So, it's important to remove the ex-spouse as the beneficiary unless you still want that person to be the one who gets the money.
Please note that even if you change the name of your beneficiary, your ex-spouse may still be able to claim some of the retirement benefits you earned while you were married. I think you should talk to a good estate planning lawyer to figure out how much of your benefits and estate will go to your ex-spouse after you get divorced.
How to Split Your Assets
During a divorce, you and your ex-spouse decide how to divide the things you used to own together. Take a moment to look over a few things you will need to split: 1) Assets that have gone up in value, like stocks and mutual funds; 2) Real estate, including investments, repairs, insurance, and mortgages; 3) Personal property, like jewellery, art, and clothes; 4) Retirement plans, like qualified plans and IRAs; and 5) Your home, which can be split in different ways to meet both parties' financial needs.
Setting up a Trust
Many people set up a Trust so that a person they choose will be in charge of their money after they die. When making plans for your estate, you can look into three types of Trusts:
- The Revocable Living Trust keeps you from having to go through probate by letting your Trustee give out your assets according to the instructions you have given.
- The Children's Trust lets you set aside money for your child to use in the future to pay for things like college, a house, etc.
The Irrevocable Life Insurance Trust, or "ILIT," lets you give away the death benefit estate tax-free whenever and however you want, even after you're dead.
Never is divorce easy. Most of the time, it takes a long time and a lot of work for both sides to get their share of the shared assets. If you're getting a divorce, it's important to talk to a qualified lawyer who can explain all the tax and asset issues you need to know about to make sure you get the best settlement possible.
