We all know that “the only constant in life is change.” No matter how hard we try to square things away, make sure we leave no stone unturned, and consider all the contingencies, life always seems to throw us a curveball.
That phenomenon is also true with regard to making important decisions on an estate plan. Indeed, many people take the time to work out a comprehensive estate plan to make sure that all of their loved ones are taken care of in the event of their passing, yet they do so based upon their life situation at the time of the plan.
All too often life changes, maybe as soon as the next day. That may require a change in the estate plan. Many people, however, forget to make those changes. It is human nature that once a person does all the work and planning to set up an estate plan, he or she will feel that the plan is made and leave it alone to move on with life. Changes in circumstance may make it important to revisit the plan, yet so few people actually do so.
One of the biggest life changes that may dramatically alter an estate plan is divorce. It is, of course, common to include one’s spouse in an estate plan. Yet, it is also common – as we described human nature above – that once a person gets divorced, he or she may not remember to go back to the estate plan and reallocate who should be beneficiaries upon his or her passing.
Luckily, Florida law comes to the rescue in such a situation. In fact, the scenario in which (i) a person makes an estate plan with a spouse in mind, (ii) gets divorced, and (iii) then passes away without having altered the estate plan is so common that Florida law has rules in place to handle that very situation. This article will discuss those rules, and allow you peace of mind to know that sometimes the law can be helpful in filling in gaps when the unexpected occurs.
If you have an estate plan that needs to be altered, or if you would like to begin planning your estate, think about going to the experts – Doane & Doane. We are the best-known estate planning attorneys in Palm Beach, and we are ready to assist you. There are a lot of things to consider when engaging in estate planning, particularly if you have a number of varied assets. The estate planning attorneys of Palm Beach at Doane & Doane can make the process easy. Call us for more information at 561-656-0200.
The Common Scenario
As a threshold matter, we need to look at the kind of scenario that the Florida law contemplates with the estate planning laws we are about to discuss. As noted earlier, in the case of a divorce not contemplated in an otherwise comprehensive estate plan, the typical scenario plays out as follows:
1. A marries B.
2. A drafts an estate plan that includes B, his spouse, as a primary beneficiary
3. A and B get a divorce
4. A dies, yet the estate plan was not changed. So, the plan still names B as a primary beneficiary entitled to an inheritance.
5. B makes a claim against the estate, seeking the inheritance.
The question becomes, how does Florida Law handle the situation?
Florida Law Regarding Wills, Trusts, and Ex-Spouses
Florida Statute § 732.507 and § 736.1105 have considered the very scenario described above. With regard to a will, Florida Statute § 732.507 provides that any provision of a will executed by a married person that affects the spouse of that person shall become void upon divorce, dissolution, or annulment of the marriage. Simply stated, even if someone got divorced but died before removing the ex-spouse from the will, the divorce itself will make any inheritance towards the spouse null and void.
The same is true when a spouse is named as the beneficiary of a trust. Florida Statute § 736.1105 provides that:
Unless a trust instrument or the judgment for dissolution of marriage or divorce expressly provides otherwise, if a revocable trust is executed by a husband or wife as settlor prior to [divorce] of the settlor from the settlor’s spouse, any provision of the trust that affects the settlor’s spouse will become void upon [divorce] and any such trust shall be administered and construed as if the settlor’s spouse had died on the date of [divorce].
In other words, if a person names his spouse as a beneficiary to a trust, and forgets to remove the spouse following a divorce and then passes away, Florida Law will not allow any money to go to the ex-spouse. At the moment of divorce, the ex-spouse loses any claim to the benefits of the trust.
What About Non-Probate Assets
There are many assets that do not go through probate. Many of those assets are instruments in which you name a beneficiary in the event of your death, such assets include:
1. Life insurance policies
2. Bank accounts that are payable upon death
3. Individual retirement accounts
4. Employee benefit plans
5. A qualified annuity
In that case, Florida Statute § 732.703 provides, just like wills and trusts, that common non-probate assets are also voided as to ex-spouses at the time of divorce. It is important to note that the “voiding upon divorce” rule requires that:
1. The estate plan, and naming of the spouse as beneficiary on the asset, occurred before any divorce, and
2. The divorce must be final. If someone dies while the divorce is pending, then the soon-to-be-ex-spouse is still entitled to the inheritance of the non-probate asset.
In sum, this is a great example of where the Florida Law helps when a person forgets to make changes to an estate plan after significant life changes. Yes, the only thing constant is change, and sometimes the Florida legislature thinks ahead to help Floridians with those changes.
If you need assistance with your estate plan or need to alter an already existing plan, call the estate planning attorneys of Palm Beach today at Doane & Doane. We would be happy to provide a free consultation, call 561-656-0200.