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Beneficiary Designations and Divorce

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beneficiary designations
What happens if your ex-spouse is named on your Will or Trust, or on a beneficiary designation form?

If you’re divorced, have you checked your beneficiary designations and the people you’ve named in your estate planning documents lately? If you completed any of these documents before your divorce was final, you may be in for a nasty surprise.

Your ex-spouse may still have legal authority to make medical decisions for you, access your bank accounts, or even decide whether or not you get to live or die, or are buried or cremated. He may be named as your personal representative (executor) or trustee on your Will or Trust. Or maybe she’s still listed as a beneficiary under your Will or Revocable Trust, or on your 401(k) or pension.

But better to get the surprise now – while you can still fix it. What would happen if you died before fixing it?

As usual, the government has a plan for you – whether you like it or not.

In Florida, we have statutes that essentially kill off your ex-spouse if he or she is still named in your Will, Trust, or as a beneficiary on your bank or investment account after your divorce was final. Our statutes even include the beneficiary designation forms you filled out for your IRA, and certain life insurance and annuity policies. So, if you forgot to remove him or her, maybe things will work out. It depends on who you named after him or her. Chances are, if you forgot to remove your ex, then you didn’t remember to add your new spouse.

However, Florida’s statutes have a big BUT…

They specifically don’t include Florida state retirement plans (such as a 403(b) or any other plan under the Florida Retirement System) or any plans covered by federal law, such as employer provided pension and retirement plans. That means your 401(k), profit sharing, and pension plans aren’t covered by Florida law.

Florida state retirement plans have their own rules, but, basically, whoever is on your beneficiary designation form gets the benefits. Oh, your ex-spouse is named and your current wife and children get nothing? Too bad, so sad. Forgot to name someone, or the person you named is dead? The state has rules to determine who gets your money. It may not be what you wanted.

Federal rules are just as bad. Any plan covered by ERISA is governed by the plan’s documents. Generally, the rules are designed to make administration quick and easy, so the person named on your beneficiary designation form wins. Each plan has its own rules for determining what happens if you forgot to name someone, or a named beneficiary is dead. If you have multiple accounts, they could each have different rules.

So, whether you’ve ever been divorced or not, make sure you periodically verify who your beneficiaries are in your estate planning documents, and on every account, plan, or policy that has a beneficiary form.

Other articles you may find interesting:

Bored? Review Your Estate Plan

Creating an End-of-Life Checklist

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