Our clients and friends often ask us what would happen to their estate plan if they got divorced. For years, the answer in Florida has been that the law will write your ex-spouse out of your will or trust by pretending that the ex-spouse is deceased. But, until now, the law did not provide any help for life insurance policies and other assets that still named the “ex” as beneficiary. As of July 1, 2012, a new Florida statute now also treats the ex-spouse as deceased for beneficiary-designated assets such as life insurance, retirement plans, pay-on-death accounts and annuities.
At first glance, this new statute looks like a perfect solution to fill an important gap in estate planning and divorce law. However, there are some significant points that must be taken into consideration by anyone who might be affected by this law in the future.
First, like the law providing for the disinheritance of ex-spouses from wills and trusts, the new statute will only remove the ex-spouse as a beneficiary after the marriage has been judicially dissolved (i.e. final divorce order) or declared invalid by court order (i.e. annulment). So if something happens to you while you are going through a divorce, the law will not prevent your soon-to-be ex-spouse from getting all of the insurance, retirement accounts, etc. for which you had listed him or her as the beneficiary.
Second, the new law makes naming secondary beneficiaries more important than ever. As mentioned above, if you pass away leaving your ex-spouse as the primary beneficiary of an asset, the law will treat the ex-spouse as deceased. This means that your secondary beneficiary will receive the asset instead. However, if you have not named additional beneficiaries, the asset will likely pass to your estate, which can significantly increase the cost of probating your estate.
We recommend that you re-evaluate your estate and financial planning as soon as you decide to get a divorce or annulment. Your estate planning attorney and insurance and financial advisors should be able to help you take action so that the law will work for you rather than against you. More information on the new beneficiary-designated asset law will follow in Part 2 of this newsletter.