Camelotta Advisors is uniquely focused on the needs of wealthy families experiencing a divorce. Our job is to help them make the most financially informed decisions to reach the highest value outcomes.
Through our years of expertise, we have seen 3 common mistakes made during divorces. These often end up costing clients money and needless frustration. Worst of all, it enables the divorce to continue coloring clients’ lives as long as they live and sometimes after they have died.
1. Not Updating Your Estate Documents
After a divorce, many people forget to update their wills, healthcare directives, and powers of attorney— many never established them in the first place. Take the case of Gary Coleman, a big time child actor known for playing Arnold Jackson on the show Diff’rent Stokes,1 who made this common mistake which cost him his life and estate
He failed to update his medical directive after his divorce, costing him his life:
You see, Coleman was put on life support following his head injury in 2010, and soon before he died, he had been taken off life support. Who took him off life support? His ex-wife, Shannon Price.1 This could be many divorcee’s worst nightmare! Coleman never updated his healthcare directive following their divorce, so Price still had legal grounds to pull the plug.
He also hadn’t updated his will, leaving the door open for his ex-wife to try claim rights to his estate:
Coleman had a will from 2005 stating that Anna Gray be the executor and inheritor of his estate. However, he made a hand written addendum to his will in 2007 leaving his estate to Price. Initially the addendum was not considered because the couple was no longer married. However Price claimed they were still married under common-law in the state of Utah and said the addendum should be followed.2
The judge on the case then had to determine if Coleman and Prince were indeed still ‘married’ at the time of Coleman’s death in order to rule on what would happen to his estate. After finding evidence that Prince had been abusing Coleman, the judge ruled in the favor of Gray, upholding Coleman’s 2005 will.2
What if Coleman had made changes to his estate after his divorce?
We don’t know if Coleman would have ever successfully made it off life support. But we do know that if he had updated his medical directive, Coleman could have outlined his wishes for this type of situation or appointed the responsibility of his life to someone he trusted to make the right decision.
Had he also updated his estate documents following his divorce, there would have been no question about who should have inherited his estate and Coleman’s legacy may have played out differently.
Creating and maintaining your estate documents helps you remain in control of your life or death and ensures your wishes will be followed, unlike the tragedy we saw with Gary Coleman.
2. Failing to Remove Your Ex as a Beneficiary on Your IRA
The next most overlooked item after a divorce is forgetting to change the beneficiary on your IRA account(s). These normally pass outside of your estate, trust, or will to whomever is named as a beneficiary. Therefore, regardless of what your estate documents say, if your ex-spouse is still listed as the beneficiary on IRA accounts, they will inherit the account(s) in the event of your passing. While this is a small item to remember, it could cost you thousands if not millions depending on how much you have saved in your IRA account(s).
Need help updating your beneficiary? Give us a call, we can help you secure your savings with ease.
3. Not Maximizing Your Social Security Benefits
The last item that goes severely overlooked is getting all your social security benefits. If you were married to your ex-spouse for at least 10 years, you may be entitled a portion of their social security benefits! Many people forget they have this benefit because they become eligible for Social Security so long after their divorce has finalized. That’s why it is important to keep track of this benefit and your eligibility—you could receive 50% of your ex-spouse’s benefit.3
In addition to being married to your ex-spouse for at least 10 years before the divorce, you must also be:4
- Unmarried
- Divorced from your ex for at least 2 continuous years
- Over 62
- Eligible for Social Security Benefits (retirement or disability)
- And your Social Security benefit (based on your work) is less than the benefit you would receive by claiming your ex-spouse’s Social Security.
If you meet all the eligibility requirements, you can apply for the divorced spouse benefit with the Social Security Administration—you will be required to provide documentation of your marriage and divorce for this benefit. More information on how to apply for the divorced spouse benefit can be found here.
Your children may also be eligible to get social security benefits on your ex-spouse’s or your own record. If your child meets one of the eligibility requirements below when you or your ex becomes eligible for Social Security benefits, they can claim child benefits on their parent’s account. Benefits will stop when the child is no longer eligible.4
Eligibility for Child Benefits:4
At the time one of their parents becomes eligible for Social Security benefits, the child must be:
- Under 18
- 18-19 and a full-time student (grades K-12)
- Unmarried
- Over 18 and disabled—disability must have began before age 22
For more information on child benefits qualification and application you can visit the Social Security Administration website here.
If you need help estimating your Social Security benefits, determining your eligibility for divorced spouse benefits, or your child’s eligibility for benefits get in touch with us today!
The truth is, small revisions like this slip through the cracks in many divorces but they are often the most important updates that need to be made. Partnering with Divorce Analysis by Camelotta Advisors gives you a trusted advocate for your divorce and wealth management needs. We provide highly tailored financial advice and develop strategic plans to help you get the best outcome.
Don’t overlook the details. You owe it to your family and loved ones to make sure they are taken care of when the inevitable occurs. We make it easy to achieve peace of mind by helping you understand what needs to be done and working with you to complete it. Contact us today to for a free consultation.
1. https://en.wikipedia.org/wiki/Gary_Coleman
2. https://danielleandandy.com/gary-coleman-estate-battle/
3. https://www.aarp.org/retirement/social-security/questions-answers/ex-spouse-social-security.html
4. Social Security Administration: https://www.ssa.gov/benefits/retirement/planner/applying7.html