How Divorce Affects Contractual Obligations for the Distribution of Assets after Death

When most people first think of divorce, the after-effects on a person’s estate plan is not likely to come to mind. Usually, people think about selling the marital home, dividing property, determining who will pay child support, and deciding how the split parenting time with the children. They may assume that the rules of property division in divorce will cover how things are divided after death since there are some provisions that cover the payment of certain future benefits. However, there are significant legal consequences to dissolving a marriage beyond retirement plans that can affect property distribution postmortem unless the policy holder or account owner takes affirmative steps to secure rights to the property in the former spouse. People invest a lot time and effort in forming an estate plan, and it is therefore important to understand how divorce can alter distribution rights without notification or the need for consent. Certainly, many divorcing couples do not wish to keep an ex-spouse as a beneficiary, but there situations where this is still the desired outcome, especially with couples married for many years where the wife did not work outside the home. An overview of the Florida law that governs property distribution after death to beneficiaries named in a contract will appear below to help divorcing couples and divorcing individuals factor this provision into their long-term financial planning.

Types of Property Covered by the Law

Once a marriage is dissolved, the law invalidates the right of an ex-spouse to property passed by contract if the beneficiary designation was made while a couple was still married. The interest in the property will be distributed as if the ex-spouse predeceased the other party, resulting in the property going to the party’s descendants or other blood relatives. It applies to any person who dies after July 1, 2012, regardless of when the property was purchased or the beneficiary named. The following types of assets are subject to this provision:

• any life insurance policy – those purchased by an individual or policies held as a part of an employee benefit plan (any plan or program funded by an employer);
• an employee benefit plan;
• an IRA;
• a payable-on-death account, i.e., a bank account; and
• a security or other account that has transfer-on-death form.

What to Do to Keep the Named Beneficiary

The easiest way to avoid the effect of this law on property distribution is to re-designate the ex-spouse as a beneficiary once the divorce is finalized. One could also include terms in a will or trust document that states the right to any assets assigned to a spouse survives a divorce or annulment of the marriage. Further, the order of dissolution could require a party to maintain property for the benefit of a former spouse if no other assets would exist at the time of the party’s death. In addition, property that is jointly owned by the ex-spouses, and, upon the death of either party, grants full ownership to the survivor is exempt from this provision. Finally, if the parties remarry and are married at the time of death, the law essentially treats them as if the divorce did not happen for purposes of distributing the deceased’s assets.

Consult an Estate Lawyer

If you are contemplating or in the process of getting divorced, it is important to consider the repercussions this decision will have on any estate planning documents you executed before or during the marriage that involve your spouse. The Tampa law firm of Bubley & Bubley, P.A. provides legal representation for divorce and estate planning, and consequently, is well placed to give you a comprehensive overview on how to make sure your wishes for your property after death are carried out. Contact us to schedule a free consultation.