Upon a dissolution of marriage, Florida law provides that an ex-spouse can not benefit from the other spouse’s Last Will and Testament and Revocable Trust. This was discussed in a prior blog. This blog will address specific aspects of beneficiary designations, payable on death designations and agents acting under a health care surrogate or durable power of attorney.
Florida law provides that, at the moment of the dissolution of a marriage, a designation of a former spouse as a beneficiary of certain assets, such as life insurance policies, annuities, payable on death designations, transfer on death designations, IRAs and employee benefit plans, is VOID. Exceptions are provided, the most significant being when federal law applies.
If Susie names her husband, Bob, as beneficiary of her $500,000 individual retirement account (“IRA”), the minute they dissolve their marriage, he is deemed to have predeceased her and the contingent beneficiary will receive the benefits. What if Susie has not named a contingent beneficiary? The assets, more likely than not, will be probate assets and more likely than not, will create major adverse income tax consequences.
What happens if Susie dies before the dissolution of marriage is finalized? Bob will receive the IRA benefits unless Susie changes the beneficiary designation prior to the dissolution of marriage. What if Susie WANTS Bob to be the beneficiary after the dissolution of marriage? She MUST prepare a new beneficiary designation after the dissolution of marriage.
What about a power of attorney? UnderFlorida law, an agent’s authority under a power of attorney authority ceases when an action is filed for dissolution of marriage or annulment or legal separation UNLESS the power of attorney provides otherwise. Filing for a dissolution of marriage is very DIFFERENT than the actual date of the dissolution of marriage. What happens if you forget this? Have you named a successor? Does the successor know about the filing of the dissolution?
What about a designation of health care surrogate? Under Florida law, unless otherwise provided in the document, the dissolution or annulment of a marriage revokes the designation of the former spouse as the surrogate.
What about a living will where you have named an individual to carry our your wishes? As a living will is defined as an advanced directive, the law is the same as for the designation of health care surrogate and, unless otherwise provided in the document, the dissolution or annulment of a marriage revokes the designation of the former spouse as the surrogate.
Note that, except of the power of attorney, the ex-spouse is excluded only upon a final dissolution of marriage. What about the time period between the filing of the dissolution and the actual dissolution? Do you REALLY want your spouse carrying out your living will or health care decisions?
ADVICE: If you are considering divorce, already filed dissolution papers or have recently been divorced, consult with your estate planner. You need to be advised of your spouse’s rights if you die prior to the actual dissolution of marriage and your spouse’s rights, if any, after the dissolution of marriage. If you WANT your ex-spouse to handle you financial and health care decisions or to be a beneficiary, then you will need to draft new advanced directives and beneficiary designations after the dissolution of marriage.
WORD OF THE WEEK: Void means “as if it never happened” or “of no legal effect”. This is to be contrasted with the term “voidable” which means that an action is capable of being affirmed or rejected at the option of one of the parties. A void beneficiary designation has no legal effect. An IRA beneficiary designation naming an ex-spouse is void after the dissolution of marriage. If the IRA beneficiary designation was voidable, then litigation could arise as to the IRA owner’s intent. You can not affirm or reject a void IRA beneficiary designation.
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