by Eric N. Allen June, 2012
Psychologists tell us that a divorce is one of the most devastating events that one may experience during a lifetime. The case concludes with a Decree of Dissolution of Marriage which serves as the written evidence of a life experience that in all likelihood concluded many months, if not years before that date. Despite that fact, the receipt of the Decree is frequently accompanied by the contradictory feelings of relief, uncertainty, and remorse. The natural inclination is to take that Decree and stuff it as quickly as possible into a file cabinet, hoping never having to look at it again. However, the better practice is to look forward and consider what steps need to be taken to protect your financial future. While this is not an exhaustive checklist, those items which every person should consider are the following:
• Name Change. Secure certified copies of the Decree to be utilized in the completion of documentation necessary (primarily governmental) in establishing any change of name.
- Asset Transfers. Follow-up to make sure that the transfers are completed with regard to any real estate, motor vehicles, bank accounts or retirement accounts that are ordered to be transferred to you under the Decree.
- Life Insurance. Review all your life insurance policies (including those provided as an employee benefit or other group plans) to make sure that you have named those persons whom you wish to be your current beneficiaries. Life insurance is a contract between you and the insurance provider. If you have not changed the beneficiary on your life insurance, your heirs may find that the proceeds are being paid to a person whom you no longer have any relationship with, and in some instances might be the last person in the world whom you would want to receive benefits by reason of your death.
- Credit Cards. While your Decree of Divorce may provide that your former spouse is responsible for paying the balance on a joint credit card assigned to that person, are you willing to take the risk that your former spouse (either unknowingly or intentionally) incurs debt on the credit card in which you are the co-debtor, thereby subjecting you (in some instances many years later) to the obligation to pay the debt when the former spouse defaults? While the Court order may require the former spouse to "hold you harmless," such language is meaningless if the former spouse has no assets from which you may recover a judgment. More importantly, the Court order is not binding upon the credit card company. The best practice is to take necessary steps to relieve yourself of this obligation before your former spouse incurs additional debt on the card.
- Estate Plan. While Indiana law provides that all provisions for the benefit of your former spouse in a Will are cancelled upon the entry of the Decree, that is only the beginning of the steps that you should consider taking. For example, you probably named your former spouse as the Executor or Trustee of your Estate. While that person would not receive benefits of your Estate, they may still have the power to control the administration. In addition, the cancellation of your ex-spouse's rights in your Estate as a result of the Decree may result in unintended tax consequences. In other words, we strongly recommend that any Estate Plan be reviewed promptly upon entry of the Decree.
The key is to look at each and every aspect of your financial and personal life and to take those steps necessary in order to begin your new life as a single person. Should you require our assistance in any of these areas, please do not hesitate to contact us.