Divorce and estate-planning go hand-in-hand

When you walked down that aisle, you intended to be married "until death do you part." But somewhere along the line, the marriage faltered and was never able to get back on track.

Now, your divorce is pending and you're worried how you will be able to afford your post-divorce life. Even if you receive spousal support, will it be sufficient? What happens if your ex dies during the alimony period? You worry that you could be left financially adrift just as you are entering your golden years.

Life insurance policies can bridge a gap

When couples divorce and one spouse plans to remarry, that spouse may want to change the beneficiary of any life insurance policies that are in force to their new spouse. But especially if they are paying spousal support to their ex, the former spouse may be prohibited by the court from changing the beneficiary on any pre-existing policies in force during the marriage.

Since no one has a lease on life, proceeds from a life insurance policy can more than make up for any unpaid spousal support after a former spouse dies. This can be negotiated in the property settlement portion of your divorce.

Read the policy's small print

Of course, since individual life insurance policy terms vary widely, it's important to review any documents very carefully to understand the coverage terms and limitations. For instance, some policies may include marital status language that could make you ineligible as a beneficiary.

Nearly half the states have enacted laws to revoke designated beneficiaries after divorce. But some life insurance policies follow federal laws over state regulations. This means that it is vital that you reconfirm a former spouse as beneficiary after the divorce is finalized. That removes any doubt about your intentions to anyone who might later try to contest your will.

Involve an estate-planning attorney in divorce

To make sure that all your bases are covered, ideally you should discuss any proposed divorce settlement with your estate-planning attorney. Do you have enough coverage for your dependents and named beneficiaries of any life insurance proceeds and retirement accounts? If not, this might be a good time to increase coverage and make any changes to reflect your intentions going forth.

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