Asset Beneficiaries are important
Even if they're clear-headed enough to think of all that, though, they're not finished. They also need to review their bank and investment accounts, insurance policies, annuities and the like that are jointly-owned or have designated beneficiaries. The proceeds of those assets are unaffected by the divorce decree, and unless the ownership and/or beneficiary arrangements are carefully changed directly with the bank, insurance company or other institution, the former spouse is going to get a windfall upon the first party's death - maybe at the expense of the parties' children or the deceased party's eventual new spouse.
While we're talking beneficiaries, permit me to mention one other potential snag that has nothing to do with divorces. Many people who've hand-crafted a trust to protect their young children or grandchildren still have them named as the beneficiaries of the kinds of assets mentioned in the last paragraph. Or maybe it's even the grown kids who are named as the beneficiaries, but then one of them predeceases the account or policyholder (that's you), and your young grandchildren step into their parents' shoes. In either of those scenarios, if the asset ends up passing to young children or grandchildren, they're going to receive the big payoff at age 18 - the legal age of majority (for all purposes but drinking!) - no matter how carefully your trust provides for its assets to be held until the kids are 21 or 25 or whatever age you think is more appropriate. That unfortunate result can be remedied easily, just by making the trust itself the beneficiary, so the assets collect in there and then are parcelled out to your off-shoots as your carefully-constructed trust provides.
Finally, let me answer a good question that many people pose while signing their new trusts: "If I'm creating a trust to hold my assets, why do I still need a will?" It's because not everyone follows through to get all their assets re-titled into the name of the trust - or made payable to the trust - so there still needs to be a vehicle for making sure those stray assets end up where they're supposed to be. And that can make a significant difference in the outcome, because if there's no will at all, and if a large asset isn't in trust name or payable to the trust - say, because it's payable to the decedent's "estate" - that asset may end up going to a relative who's entirely different than the trust beneficiaries. We're actually wrestling with that very scenario right now, as a recent NH resident/decedent set up a trust in another state with numerous charitable beneficiaries carefully provided for, but then forgot to back up the trust with a will when she arrived here. Now the considerable non-trust assets are heading off to the family members who inherit when there's no will - and who may be perfectly nice folks, of course, but who weren't the intended recipients. A simple will passing everything to the trust would have avoided that nightmarish outcome.
Post 05/22/2015 Estate Planning