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Divorce creates urgent need to update estate plans

The estate plans of people in Colorado often include spouses as beneficiaries. A divorce filing, however, triggers the need for people to review the terms of their estate plans in light of the ending relationship. Sudden death or incapacity could cause an ex-spouse to receive distributions or even be in charge of someone's medical decisions.

The case of a man who died two days before a court processed his final divorce papers illustrates the hazards of leaving a former partner as a named beneficiary. The man had received a multi-million-dollar accident settlement prior to his marriage. The prenuptial agreement designated his settlement money as his sole nonmarital property. He placed the money in a trust. At a later point, he made his wife an 80 percent beneficiary of the trust. He assigned the remaining 20 percent to other family members.

His wife eventually filed for divorce. As the divorce progressed, he did not alter the terms of his trust. He died shortly before the marriage officially ended, and his former spouse received 80 percent of his trust, or $14.4 million.

In addition to monetary distributions, a situation like this could place a former partner in charge of a person's financial and medical decisions. Any documentation that names the spouse as the decision maker if a person becomes mentally or physically incapacitated would apply regardless of divorce proceedings unless a person amends the paperwork and names a new representative.

A person who needs to alter an estate plan after a death, divorce or birth could ask an attorney to prepare the paperwork. An attorney may also provide strategies for most estate planning needs, like protecting assets, managing a minor's inheritance or planning for long-term nursing care.

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