It is sad when people go through divorce both financially and emotionally. One thing my clients tend to worry about is whether their soon-to-be ex-spouse will receive any money from them if they die (sorry for the plethora of hyphens in the last sentence). Barring a prenup or post-nuptial agreement to the contrary, Florida trust and estate law has several key operations that need to be addressed during or after a divorce.
Under Florida law, former spouses named in a legal will or trust are treated as if they passed away before you upon a legal divorce judgment. Section 732.507(2), Florida Statutes (2009); Section 736.1105, Florida Statutes (2009). Meaning, if your ex is in your will or trust, then he or she will receive nothing from the will or trust after a judge enters a dissolution of marriage judgment and not upon filing for divorce, you moving out of the marital home, or there is a separation.
Because most people leave everything to their spouse, most estate plans will require a review at the beginning of divorce proceedings. Keep reading because there are more scenarios to consider, which will require you to revise your estate planning unless you want ex-spouse to indirectly inherit from you or benefit from your estate planning.
1) Review life insurance, annuity, and retirement plan beneficiary designations - Florida law does not automatically change beneficiary designations in life insurance, annuity, and retirement plans upon divorce. The survivorship benefits are contractual and not an operation of Florida estate and trust law. Thus, you will need to contact the companies that manage your post death survivorship products.
2) Parents can inherit from children under Florida intestate laws - Florida intestate law determines how someone’s property will be distributed upon death if that person dies without a valid legal will. If you die without a will or with a will with bequests to your children, then your children will own your property upon your death. If one of your children receiving your property dies without a will and without children, then your former spouse will get your property. You will want a simple trust in place to avoid this issue.
For example, you are recently divorced and have $300,000 in municipal bonds and one 20-year-old son. You die, then your son passes away without a will while still owning the bonds. You get a divorce –> You own $300,000 –> You pass away –> Your 20-year-old son inherits $300,000 –> Your son dies without a will or children –> Your former spouse inherits $300,000 through Florida’s intestate laws. It happens, watch out.
3) Revoke any durable power of attorney appointing your spouse as attorney-in-fact over your personal finance at the first instance of marital separation – A lot of couples appoint their spouse as attorney-in-fact under a durable power of attorney when planning for incapacity. You do not want your spouse to use a durable power of attorney to transfer money or other property into an account that you cannot legally touch – despite serious legal ramifications for power of attorney abuse, this can happen. Destroy the original signed durable power of attorney, notify any banks or investment companies of the revocation, and consider recording a notice of revocation in the public records.
Key lesson: review and revise your estate plan when you or your spouse files for divorce, and change the beneficiary designations on your life insurance, retirement plan, or annuity.