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If you're on your own now, whether through death or divorce, you need to carefully re-examine your entire financial situation, including your life insurance needs. In fact, you almost have to start from scratch because going from two spouses in a household to one will affect just about every financial calculation you can imagine.

With regard to life insurance, the first thing you'll want to do is determine whether you still have a need for coverage. Remember, one of the main reasons you purchased life insurance in the first place was to provide financial security for your immediate family. If your spouse has died and you either have no children or your children are grown and financially independent, you may no longer need life insurance.

But what if your spouse has died and you now have to raise young children on your own. Then instead of dropping your life insurance, you actually might need to increase your coverage. Think about it. As a single parent, you're the primary caregiver, breadwinner, go-to person and so much more. Your children are probably entirely dependent on you. By having adequate life insurance coverage, you can help ensure that your children will have the kind of lifestyle and opportunities you'd always dreamed they'd have.

Another important consideration is beneficiary designations. Most people will list their spouse as their primary beneficiary. So if your spouse has died, you should immediately change the beneficiary designation. Otherwise, a surrogate court judge might be the one to decide how to distribute your life insurance proceeds among your children or other family members.

If you have children, deciding whether to list them as beneficiaries will depend, in part, on their age. If they're minors (under age 18), you should probably establish grantor trusts for each of your children and name the trusts as the beneficiaries. If you go this route, you'll also need to appoint a trustee (It's also a good idea to appoint a successor trustee, in case something happens to your first trustee). When you die, the trustee will be responsible for distributing funds to your children in accordance with your wishes. When the children are minors, trustees are often granted the discretion to make distributions as needed, within certain parameters. Once they're older, wills will often specify that distributions be made to the children in lump sums when they attain certain ages (For instance, you could arrange for your children receive equal payouts when they reach ages 20, 25 and 30). Alternatively, you could name adult children as the beneficiaries of your policy. But just know that if you do that and, say, your son or daughter gets divorced or is divorced when you die, the proceeds may be subject to equitable distribution. And would you really want half the proceeds to go to someone who's no longer in the family. Trusts can help prevent that from happening.

The various scenarios described above all assumed that your spouse is deceased. But what if you've just divorced and have young children. Then things can get more complicated because your ex-spouse may be the one to care for and provide for your children if you die while they're still minors. Again, this is where trusts can be a good option. They can help ensure that the money is used to support your children needs.

A final word of advice. These are very important and complex decisions, and may require the assistance of not just an insurance professional, but an attorney and an accountant as well. So if you're suddenly in the unfamiliar position of having to make financial decisions on your own, don't try a do-it-yourself approach. The stakes are way too high, especially if there are young children involved.

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