A large percentage of divorced persons, widows, and widowers subsequently remarry one or more times. It is important to consider the legal effect divorces may have on any pre-existing estate plans including wills, trusts, non-probate transfers [such as joint tenancy with rights of survivorship, community property with rights of survivorship, payable on death (“POD”) and transfer on death (“TOD”) beneficiary designations].
What effect does divorce have on a will or trust executed during marriage?
A divorce, by statute, revokes (cancels) any provision in a will executed prior to the divorce directing distribution of any assets to the former spouse (or members of the former spouse=s family) of the divorced person. Likewise, a provision in a revocable trust executed prior to the divorce directing distribution of assets to the former spouse is revoked.
What effect does divorce have on assets where a former spouse was designated during the marriage as a “POD” or “TOD” beneficiary (such as on a bank, credit union account, stock, bond or brokerage account)?
A divorce revokes the beneficiary designation naming the former spouse or any members of the former spouse’s family. It is of critical importance, however, that written notice of the divorce be given to the institution because if the institution delivers the asset to the named beneficiary in good faith and without notice of the divorce, the institution is not liable for having made the distribution to the former spouse.
What effect does divorce have on assets titled during marriage in joint tenancy with rights of survivorship or community property with rights of survivorship with a former spouse?
The divorce terminates the survivorship provision and thereafter the parties own the asset as tenants in common (each owns an undivided equal interest but the death of one of them does not transfer the deceased person’s interest to the survivor). It is essential that there be specific written notice of the divorce recorded in records appropriate to the kind and location of the property. Otherwise, the party making delivery to the former spouse (or family member of the former spouse) or a third party acquiring the property or asset for value without notice is protected from liability.
What effect does divorce have on a designation of a former spouse or member of the former spouse’s family as beneficiary of a life insurance policy?
The beneficiary designation is revoked upon the divorce unless there is some contrary provision in the divorce decree which provides for beneficiary designation or ownership of the policy. As stated above, however, it is critical that written notice of the divorce be given to the insurance company. Otherwise, the insurance company is not liable for payment to the former spouse or member of the former spouse’s family.
So, What Action is Required/Advised upon a Divorce?
It is dangerous to rely upon the statutory provisions discussed in this article instead of having the entire estate plan reviewed and revised during a divorce proceeding. Unintended consequences can occur in spite of the statutory provisions! Upon the filing of a divorce action, there should be consultation with an attorney familiar with the estate plan and appropriate revisions, changes made to any existing will, trust, beneficiary designation, joint ownership of assets. The statutory provisions do not cover all possibilities!