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Your estate plan and taxes can be impacted by a divorce

There are several ways that a divorce can impact your life. Many people think about the immediate effects, such as who will get the house and what is going to happen with the children. You have to think beyond that so that you can make choices about how to handle your divorce.

When you are divorced, you will need to reevaluate your estate plan. If you pass away, you probably don't want your ex to get your life insurance policy or the assets that you hold. In this case, you will need to update the beneficiary on your life insurance policy and update your will. Don't forget to change your powers of attorney documents if you had your ex listed as the person in charge of those.

You will also need to think about the tax implications that come with the divorce. Typically, you won't have to pay taxes on assets that are transferred between you and your spouse at the time of the divorce. There are some specific considerations if you have a marital home to deal with or retirement accounts that must be addressed.

Up until the divorce is final, you can opt to file your income taxes as married filing jointly if you can still get alone. The alternative is married filing separately, which is more costly. Once the divorce is finalized, you would either file head of household or single, depending on your circumstances.

Before you make any decisions about the division of property for your marriage, you should find out how each option will impact you. This will let you plan for the changes that you need to make so that you aren't stuck in a rut when the divorce is finalized.

Source: FindLaw, "Divorce, Taxes, and Your Estate Plan," accessed Jan. 20, 2017

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