Guest post by Sean Smallwood, Esq.
When couples make the decision to divorce, one of the legal issues they need to pay close attention to the estate planning. It sounds boring and tedious but ignore it at your peril. You want to be sure your ex does not get your money when you die.
You might think that your divorce decree is enough, that it would override previous beneficiary statements but in most situations, it does not necessarily cut off your ex from ending up with your assets from an estate when you pass away. The most common situations for this include an ex-spouse remaining listed as a beneficiary on a life insurance policy, an ex-spouse receiving assets that are left behind to minor children or an ex-spouse remaining listed as a beneficiary in a will.
Not Changing Your Life Insurance Beneficiary
Probably the most common situation we see in our divorce law firm is where throughout the course of the marriage, the wife was listed as a beneficiary on the husband’s life insurance policy. Most people will get life insurance, assign beneficiaries and then try their best to forget about the whole thing because most people do not want to think about their own death.
This forgetfulness can continue on through the divorce process ending with a final judgment of dissolution of marriage without anyone ever contacting the insurance company and changing the beneficiary information. Though changing beneficiary information is usually as simple as filling out a single form, which can take as little as five minutes, many people overlook this which ends up with their ex-spouse receiving all or a portion of their life insurance benefits.
The fact that there was a legal divorce is of little consequence as insurance companies can usually only pay attention to the names listed as beneficiaries. This is because a person can name whomever they would like as a beneficiary including a former spouse and there is little or no way to prove that someone did not intend to leave benefits to their former spouse.
Not Creating A Trust
Another common issue related to life insurance benefits going to a former spouse comes up during the actual divorce litigation. It is very common for there to be a requirement that child support payments be protected by a separate life insurance policy. The theory behind this is if the payor spouse passes away unexpectedly, there are life insurance benefits in place to ensure that child support or alimony continues to be paid.
Many divorce settlement agreements specifically name the former spouse as the beneficiary of these benefits, however, many times it is possible to strategically word the marital settlement agreement to specify that the beneficiary would be the children, via a trust, with the former spouse named as the trustee, which is a more preferred avenue to ensure that the former spouse does not get a financial windfall and utilize the life insurance benefits as an account for “fun money.”
Listing Minor Children As Beneficiaries
The next common situation where we see former spouses receiving benefits after death is when the children under the age of 18 are listed in a will. The issue here is that any substantial assets or sums of money that are left to a minor child will typically end up in the hands of the other parent. To illustrate this, think about the situation where a million-dollar estate is left to a 7-year-old child. The mother would likely be tasked with the responsibility of the assets.
One way to avoid this from happening is to set up a trust in the name of the child and preselect a trustee who is trusted. This way any necessary payments for the good of the child or payouts after the child reaches the age of 18 will need to adhere to the rules and parameters that you set out ahead of time.
Not Updating Your Will
Finally, the other common area where a former spouse can end up getting assets after the death of the other spouse is where someone simply forgets to change their will. This is more common than most people would think.
One reason, as highlighted above, is that many people intentionally try not to think about their will and they block it out of their mind because they do not want to think about their own death. This can lead to forgetfulness about the need to change the language of the will.
The sign of a good divorce attorney is one who pays attention to detail and reminds his client to review any will they may have and to make the necessary changes right away to avoid this from happening.
While this is not a complete list of ways a former spouse can end up inheriting property, these are the most common.
Probate law is known to be one of the nastiest areas of practice aside from divorce law and for a good reason, too. The level of fighting and litigation that can take place after a person passes away is astonishing. The best way for all of us to avoid putting our family through that type of stress is to make sure that in addition to a divorce attorney, we also think about consulting with a probate lawyer about the best options to protect our families in the future.
Sean Smallwood, ESQ is a divorce attorney and the founder of Sean Smallwood, P.A., a law firm specializing in divorce and family law in Orlando, Fla. He has helped many families with a wide variety of divorce and family law cases. Orlando Style Magazine has recognized him as one of Orlando’s Legal Elite “Rising Stars” and has received recognition for Pro-Bono contributions to the community.