After a divorce is granted, the former spouses’ plans for the disposition of their assets generally change. Many estate planning documents — the will, all insurance policy beneficiary designations and all deeds – change after a divorce when new beneficiary instructions are created.
A will can provide for a trust to become effective if the children are not yet adults when the parent dies. The will establishes the trust and designates a trustee to manage the estate. The trust must specify when it ends, which is generally when a child reaches a certain age. Often parents want to delay the receipt of large amounts of money or assets until the child is older, and this can be specified in the will and trust. Often a person desires his or her children to receive their assets in the event of death. However, to make sure that the correct disposition is made, a new will should be executed.
Beneficiary designations on life insurance, retirement plans and accounts, IRAs, and other bank and investment accounts must also be changed. These can be changed to the children, or to the estate, if the parent wants the trust created under the will to receive the property and manage it.
In planning an estate, a person should remember that wills are not controlling and have no precedence/jurisdiction over the beneficiary designations of IRAs, 401(k)s, insurance policies and annuities, which work by operation of law. It is always important to designate a contingent beneficiary for these accounts because if the primary beneficiary predeceases the owner, the account will need to be probated. Probate courts supervise distributions left to minors, so naming a minor as a beneficiary means the estate goes straight to probate, but establishing trusts in the children’s name bypasses probate.
New deeds should also be executed to make sure the terms of the divorce decree are enforced and that estate planning expectations are honored.