Divorce Doesn’t Automatically Change Designated Beneficiaries
Birth and death. The two defining moments that mark the beginning and end of life. But many other events can happen between those two events that can have life-changing consequences. Marriage and divorce are two of those. With this in mind, the Florida legislature is taking steps to help avoid some of the estate planning pitfalls that can arise.
Here’s a common scenario: on the happy occasion of a marriage, the new husband takes out a life insurance policy on himself with his new wife as the beneficiary. He wants her and any children they may have to be protected financially should anything happen to him. A decade later, the honeymoon is over and the couple divorces. Two years later, the husband remarries.
After a few more years, the husband dies. In his will, he has named his second wife as the sole beneficiary to his estate. But unbeknownst to the second wife, the first wife is still named as the beneficiary on the $500,000 life insurance policy the husband purchased on the occasion of his first marriage.
The second wife files a claim with the insurance company for the proceeds of the insurance policy. Even though the first wife is named as the beneficiary, surely the divorce took care of that. But this hasn’t always been true.
In 2012, the Florida legislature passed a law that says that any beneficiary designation made prior to the death of the owner of benefit plan or insurance policy or other asset is voided when the marriage between the owner and the beneficiary ends by divorce or annulment. Many would thank the lawmakers for clarifying that problem and move on. But it isn’t that simple.
The law exempts several types of assets from the new arrangement. And whether the law applies or not can rest on something as simple as when a document was signed, or whether another state, or even federal, law disagrees with it. So it is possible that the law is now even more complex than before the 2012 law took effect.
If you have created an estate plan in the past and are going through or have been through a divorce since then, it would be advisable to see a Florida estate planning attorney who understands how these recent changes in the law may affect the changes in your marital status.