This is the second part of a newsletter addressing a recent change in Florida law regarding divorce and beneficiary-designated assets such as life insurance, retirement plans, pay-on-death accounts and annuities. As of July 1, 2012, a new Florida statute
avoids the distribution of this type of asset to an ex-spouse beneficiary by pretending that the ex-spouse died before the owner. Part One of this newsletter explained when this new law starts protecting assets and who receives the assets instead of the
ex-spouse. This part provides some additional considerations for those who might be affected by the new statute.
A significant fact about the new divorce law is that it does not protect all beneficiary-designated assets. The statute specifically applies to life insurance policies, annuities, employee benefit plans, IRAs, and pay-on-death accounts. However, it will not affect either joint accounts with rights of survivorship or any policy or contract that is not governed by Florida law. Additionally, the new law will not write the ex-spouse out as beneficiary if a court order required the owner to maintain the asset for the benefit of the ex-spouse or children of the marriage, or if the beneficiary designation was irrevocable under the terms of the divorce or otherwise. Thus, relying on this law to “automatically” protect you could prove dangerous.
This is highlighted by the fact that, even when the new statute does apply, it will be difficult to enforce. The law gives substantial protection to the institutions that will be responsible for paying out the beneficiary-designated assets (the “payors”). Specifically, a payor is not liable for distributing an asset to the ex-spouse where the beneficiary designation does not specify the relationship between the ex-spouse and the owner or if it states that the ex-spouse is not married to the owner. A payor is also entitled to rely on the marital status and spouse of the owner stated on a death certificate, even though that information is not verified by the funeral homes that usually submit it. Shockingly, this immunity applies even when the payor knows that the person the asset is transferred to is different than the person who should own it according to the new divorce law. This means that once the benefits are paid out, it becomes much more difficult to redirect them to the correct beneficiary.
Again, 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, insurance agent, and financial advisor should be able to help you take action so that the law will work for you rather than against you.