Probate and Trust Litigation Blog - How does divorce or an invalid marriage affect the transfer of estate or trust assets?Posted September 29, 2018 in Florida Probate Litigation, Florida Trust Litigation
Florida Probate and Trust Litigation Blog
How does divorce or an invalid marriage affect the transfer of estate or trust assets?
Too often those who draft estate planning documents fail to timely update the estate plan after significant change in family circumstances. One in particular is divorce. It is not uncommon for an estate plan to gift half or more to a current spouse. For example, here is a typical example:
1. Decedent marries spouse.
2. Decedent drafts estate plan including spouse as a major beneficiary.
3. Decedent and spouse divorce. Spouse becomes ex-spouse.
4. Decedent dies. The estate plan still names ex-spouse as a major beneficiary entitled to inheritance.
5. Ex-spouse makes a claim to the estate seeking a distribution.
What happens when the Will or Trust include an ex-spouse?
Florida's legislature contemplated this exact circumstance. Any provision of a will executed by a married person that affects the spouse of that person shall become void upon divorce, dissolution, or annulment of the marriage. After the dissolution, divorce, or annulment, the will shall be administered and construed as if the former spouse had died at the time of the dissolution, divorce, or annulment of the marriage, unless the will or the dissolution or divorce judgment expressly provides otherwise.
"Unless the trust instrument or the judgment for dissolution of marriage or divorce expressly provides otherwise, if a revocable trust is executed by a husband or wife as settlor prior to annulment of the marriage or entry of a judgment for dissolution of marriage or divorce of the settlor from the settlor's spouse, any provision of the trust that affects the settlor's spouse will become void upon annulment of the marriage or entry of the judgment of dissolution of marriage or divorce and any such trust shall be administered and construed as if the settlor's spouse had died on the date of the annulment or on entry of the judgment for dissolution of marriage or divorce."
Divorce Also Voids Non-Probate Asset Transfers
Because Section 732.507 is limited to will provisions, there were lawsuits in Florida about whether divorce judgments terminated or voided other non-probate assets. For example, what if an ex-spouse remained named as a primary beneficiary of a life insurance policy or was a transfer-on-death beneficiary of a bank account prior to a divorce?
In 2012, the Florida legislature enacted Florida Statutes Section 732.703, which clarifies that common non-probate assets are also voided to ex-spouses:
"A designation made by or on behalf of the decedent providing for the payment or transfer at death of an interest in an asset to or for the benefit of the decedent's former spouse is void as of the time the decedent's marriage was judicially dissolved or declared invalid by court order prior to the decedent's death, if the designation was made prior to the dissolution or court order. The decedent's interest in the asset shall pass as if the decedent's former spouse predeceased the decedent."
§ 732.703, Fla. Stat. In other words, the provision to the ex-spouse is immediately void upon the judicial dissolution of marriage. There are some critical portions of the statute to mention. First, the estate plan must have been created before the dissolution of marriage. If a decedent decides to include an ex-spouse long after the divorce was final, they may do so and that provision will be valid. Second, the statute requires a judicial dissolution or court order to be go into effect. So, if there is merely a divorce proceeding pending, the decedent's estate plan will not be deemed void. This issue can be complicated, but that is an issue for another day (For example, is the judgment final if a judgment is entered and a decedent dies while a motion for rehearing is pending - likely not).
What non-probate assets are impacted by a divorce in Florida?
The statute is not limited to just the estate plan. In Florida, a divorce also terminates the following additional non-probate assets, for which an ex-spouse may have been a beneficiary:
- Life insurance policy,
- Qualified annuity, or other similar tax-deferred contract held within an employee benefit plan.
- An employee benefit plan.
- An individual retirement account
- A payable-on-death bank account.
- A security or other account registered in a transfer-on-death form.
- A life insurance policy, annuity, or other similar contract that is not held within an employee benefit plan or a tax-qualified retirement account.