Divorce: Estate Planning & Insurance

Posted Friday, September 3rd, 2010. Filed Under Financial Empowerment


There are various issues to consider:
a. Your Will
Usually couples make each other the beneficiary of their Wills. When you get divorced, any provisions in the Will where the former spouse is left assets or made the Executor are revoked. Therefore, you will need to reassess the provisions in your Will. Consequently, if you are drafting a new Will after a marriage breakdown, you should make sure that any dependent children are properly provided for on your death. The Family Law court can step in and overrule your Will if you don’t. Take the opportunity to review 2bempowered Will planning checklist on important issues to consider when creating a Will, and complete this 2bempowered personal record keeper to help you gather and update important information that you can share with loved ones including your executor or executrix.

b. RRSPs and RRIFs and Life Annuities
With these investment structures you can (and should in most circumstances) have named beneficiaries. When your relationship breaks down you will need to look at these to determine if the beneficiaries are still appropriate in your new situation.

In many cases, married couples name each other as the beneficiaries of their life insurance policies. If you are becoming separated or divorced, you may want to reconsider who you name as your beneficiary. If you do not contact the insurance company, your former spouse will continue to be the beneficiary of the policy. In the case of relationship breakdown, you may want to change the insurance coverage on your life in order to provide for your children should anything happen to you.
Depending on the nature of the separation agreement, you may be required to buy life insurance with your former spouse and/or children named as the beneficiaries. This is typically the case where spousal and/or child support is being paid by the primary income earner. This ensures that if the supporting spouse dies, there would be enough money to support the children. In the case of this type of policy, the beneficiaries are ‘Irrevocable’. That means the beneficiary cannot be changed to someone else without the written permission of the current beneficiary.

Jay F. Llave
“Create and Protect Wealth”
Insurance and Financial Advisor
Creative Planning Financial Group
(416) 487-5210 ext. 5317
http://www.jayllave.com About me
http://www.jayllave.com Our BLOG

2bempowered’s Personal Records Keeping:
Make sure that your spouse/siginificant other/children/executor know where the following Documents and Information Is:
* your will
* the family passports – for each person
* Birth Certificates OR Landed Immigrant Status Papers OR Citizenship (if new)
* Health Card for all family members
* CPP information
* RRSPs – what are you invested in?
* Name and number of Children’s doctor: family, eye, dentist, specialists
* What bank(s) do you and your significant other deal with – all accounts
* Name of your financial advisor(s) – what does he/she financially control? There may be different people that you deal with.
* Investments – mutual funds? Insurance? Reits? Where is the money invested?
* Name of accountant(s) and lawyer(s)
* Who is your mortgage registered with – what is the status: renewal date, how much owing on it, etc. Whose name is on the mortgage? Is there a lien on the house?
* Car leasing information
* Property taxes – are you paid up to date?
* Personal taxes – is your spouse paid up to date?
* Personal Bankruptcy- will this affect the estate?

2bempowered’s Will Planning Checklist:
* in the case of joint custody, if you die before your ex-husband/wife the children will go to the custody of the living parent. In a case where both parties are gone you must think about who you want to leave your child/children to – who will be the most responsible, parent in the way that you want, and loving to your child/children.
* in the case of sole custody then naming a person to care for your child/children is imperative. Again, think about the most responsible, a person/couple who parents in the same way you do, and one who loves your child.
* Make sure that you have enough life insurance for your children so that they can live in a lifestyle that they are used to. Term insurance is inexpensive. Name your child/children the beneficiaries
* In a will you have a financial executor – choose wisely, one that will work in the best interests of the child/children, you can trust with the money that is left, and will honour your wishes. I have spread out the distribution with 25% at age 21, 25% at age 30 and the remainder at age 35. I am concerned that if my children are left with too much money at a young age they will blow it. The executor will have discretion to distribute for what is necessary – education and so on.
* In a will you also have a medical executor – make your wishes known to this person – Do not want to have heroic measures done? Do not want to live in a vegetative state? Make sure that your beliefs are known to this person so that they will carry them out.
* In the case of property – make sure that all your taxes are covered so when the property is transferred to the child/children (young or old) that they do not have to worry about this. In many cases, property – second homes, cottages, condos, apartment buildings, etc. are passed on and there is a capital gains tax that if not financially considered can make the property too expensive for the child and will need to be sold. (This is in Canada – other countries may have different rules).
Make sure that they are the beneficiaries of your property.
* RRSPs – make sure again that you have the taxes covered for your investments. RRSPs work because they are a deferred tax – someone will have to pay for the taxes.
Make sure that the child/children are listed as the beneficiaries.
* Insurance – make sure again there are no tax costs – and make sure

I strongly suggest that you sit down with a lawyer and discuss what your needs are. A will doesn’t have to cost a lot of money – $300-$400. It is a worthwhile investment and will give you peace of mind.

Depending on what country you live in you will have to find out the laws around transferring property (primary and secondary), RRSPs (registered retirement savings plan) and so on.

Don’t wait do it now!

All my best,


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