If you have divorced, remember to update your estate plan documents. Wills, power of attorney, healthcare proxys and other pertinent documents should all be updated to reflect your intentions. Providing copies or the location of these most recent documents to the appropriate people is a must to avoid problems.
One woman’s failure to heed this advice apparently resulted in her ex-father-in-law becoming the unintentional beneficiary to her property after she died. The NY woman named her husband the primary beneficiary of, among other things, her childhood home when they married in 1996. When they divorced in 2007, he was automatically cut from the will under NY law, but the secondary beneficiary, her ‘ex-father-in-law’, remained on the original will. When the woman died 5 years ago, her family was unable to locate the revised version of the will, therefore, the $200,000 family home was awarded to the ex-father-in-law.
When it comes to updating beneficiary designations, don’t overlook bank and brokerage accounts, insurance policies, retirement accounts and annuities that name beneficiaries or individuals to whom ownership will transfer at death. It is not uncommon for some of these accounts and policies to be overlooked and, as a result, the proceeds will pass to named individuals – intended or not. In a 2013 U.S. Supreme Court case underscoring the importance of keeping your documents up to date, an ‘ex-wife’ took home the proceeds from a life insurance policy because her ex-husband failed to update his beneficiary designation to reflect the new wife. Ex wife…$124k; new wife $0.
On the other side of the coin are cases where an ex-spouse is given the beneficiary designation through a divorce settlement. In this scenario, the beneficiary (the ex) may want to take steps to clarify the arrangements. New beneficiary paperwork should be prepared and written acknowledgement of the changes should be requested from the insurance company to play it safe.
If there is an individual-retirement-account (IRA), money can typically be divided and rolled over into separate accounts with the proper documentation. For qualified retirement plans such as 401ks, a court-ordered Qualified Domestic Relations Order (QDRO) can be obtained according to the terms of the divorce settlement.
If you are considering divorce, there are many issues to iron out from child custody & support to alimony and property division. Securing knowledgeable and experienced legal counsel may help you avoid a costly mistake. Contact the Law Offices of Schlesinger & Strauss LLCfor help today.
Source: Wall Street Journal, “After Divorce, Separate Your Estate Plans Too”, by Liz Moyer, accessed June 11, 2015.