Anyone who has undergone major life changes, such as the birth of a child or a divorce, has to consider how that change is going to affect his or her current estate plan. Even people who haven't yet created an estate plan would do well to learn how specific considerations must be made in the event of a divorce. Michigan residents might like to know how to protect assets that aren't covered in a will.
Retirement accounts are the item that will affect many people who are getting a divorce. When it comes down to it, wills don't provide instructions about how to pass along retirement accounts. Instead of including these in your will, you have to ensure that the beneficiary information on the accounts is accurate. This means that you need to update that information if your ex is still listed on the accounts.
An individual retirement account will go to the person you included on the form when you set up the account. It is important to file an updated beneficiary form if your relationship status changes, such as if you get divorced and no longer want your ex to get the IRA.
In the case of a 401(k), a current spouse would get the assets if you pass away. The only way to modify this is for your current spouse to relinquish his or her claim to the assets. That relinquish notice has to filed with your employer. Only then can you designate other beneficiaries for the 401(k).
Creating an estate plan requires a lot of thought. It is important that you get everything set up the way you want it as soon as possible so that it will all be in place when you pass away. Knowing how to handle various types of accounts might help you to ensure that your estate plan is properly and legally conveyed to make estate administration easier when you are gone.
Source: ABC News, "How Your Ex-Spouse Could Inherit Most of Your Money" Laura Mattia, May. 23, 2014