March Monthly Tip – Spring Forward with Seven Key Steps to Update Your Financial Plan!

Our Monthly Tip, as featured in Family Lawyer Magazine: 

Spring is right around the corner and that means so is spring cleaning. While this time of year usually evokes thoughts of organizing closets, it is also the ideal time for those in the throes of divorce or recently divorced to organize their estate and financial plans. Leverage March’s spring cleaning theme to embark on a financial spring cleaning!

Here are seven key steps for you to consider to keep your wealth plans in order. You should:

1. Review your will for how your property passes and your executor & trustee choices. Is your will up to date in light of your divorce? Are the people or institutions named to serve as executor and trustee in your will the best choice for your family right now? While some planning might have to wait until the divorce decree is final, wills generally can and should be updated while divorce is pending to leave a soon-to-ex-spouse the minimum required under your state’s laws or prior agreement.

2. Update your power of attorney, health care proxy, and living will. Is your ex-spouse or soon to be ex-spouse designated to make important health care and financial decisions for you? These documents generally can and should be updated while divorce is pending. Consider who you may want to entrust to act in those important roles.

3. Be sure of proper titling of assets. This one often gets missed. You may have updated your will, but are your assets titled consistently with your new plan? Certain accounts pass outside a will, so it’s important that accounts are titled consistently with the new plan.

4. Confirm beneficiary designations. For assets like retirement accounts and life insurance, do you have the right beneficiaries named? These assets also pass outside of your will, so while you may have updated your will, it is important to revisit beneficiary designations to make sure those designations dovetail with your new plan.

5. Evaluate life insurance needs. Is life insurance advisable to secure settlement obligations? The pandemic has certainly underscored the need to ensure payments will continue if the spouse obligated to make the payments dies. Is the spouse who will receive the proceeds in the event of an untimely death getting duplicate premium notices to ensure the premiums are being paid in a timely manner? Is new insurance now advisable to benefit heirs? If so, what is the proper amount of coverage? If you have an existing policy, is it still sufficient and performing properly? Is that existing policy held in trust so that family members may avoid having to pay estate tax on the policy proceeds?

6. Evaluate other insurance needs. Health, life, disability, property & casualty, and long-term care insurance should all be reviewed to identify what actions might be recommended, including verifying policy ownership and beneficiary designations, and confirming who is responsible for making premium payments.

7. Have a thoughtful financial plan. An experienced financial advisory team can help get finances organized, assist with cash flow projections, stress test a proposed settlement sum for different investment landscapes and economic environments, model projected rates of returns, inflation assumptions, tax consequences, upcoming outlays, and evaluate different settlement options and support scenarios. Particularly if a lump sum settlement/alimony are likely to be the only major cash inflows, the spouse receiving those funds should have a thoughtful long-term plan in place to help ensure that the settlement proceeds can sustain a lifestyle.

For those going through divorce, the process can feel overwhelming. However, the right team of advisors can help you take these important steps to help secure your estate and financial plans and spring forward with confidence this season.

Please visit our Matrimonial and Divorce Advisory Solutions resource page for more timely divorce planning content.

This article is for general information only and is not intended as an offer or solicitation for the sale of any financial product, service or other professional advice. Wilmington Trust does not provide tax, legal or accounting advice. Professional advice always requires consideration of individual circumstances.