Sampson Collaborative Law

 ✉️ michael@sampsoncollaborativelaw.com

Facebook X-twitter Instagram Linkedin

Sampson Collaborative Law

Menu

Beneficiary Designations

Dahlias Pikes Place Public Street Market in Seattle Washington ikes Place Public Street Market in Seattle Washington. Text reads 'Remind Employees to Update Beneficiary Designations After Divorce'

Remind Divorced Employees to Update Beneficiary Designations

Beneficiary Designations /

Employers: think about reminding your employees to update their beneficiary designations and forms after divorce. For multiple covered assets, section 732.703, Florida Statutes voids upon divorce beneficiary designations of an ex-spouse. See State Farm Life Insurance Company v. Stone, Case No. 5:15-cv-267-Oc-30PRL (MD Fla. October 9, 2015). In Stone, the court allowed interpleader of disputed proceeds of former husband’s life insurance policy until former wife’s conflicting claims with a successor beneficiary could be resolved. Similar automatic revocation on divorce applies to will and trust provisions designating an ex-spouse as beneficiary. Effective July 1, 2021, Florida’s Probate Code, Section 732.507(2), Florida Statutes (wills) and Section 736.1105, Florida Statutes (revocable trusts), void on divorce provisions that “affect” an ex-spouse. See Laws of Florida 2021-183. Will and Revocable Trust Provisions that “Affect” a Former Spouse: Update Beneficiary Designations Will Provisions that Affect An Ex-Spouse Are Void on Divorce With few exceptions, Florida law voids upon entry of a final judgment of dissolution, any will provision that “affects” a former spouse.  Divorcing employees should review their estate planning documents and update beneficiary designations under their will. Section 732.507(2), Florida Statutes, amended effective July 1, 2021 (Laws of Florida 2021-183), provides: (2) Any provision of a will that affects the testator’s spouse is void upon dissolution of marriage of the testator and the spouse, whether the marriage occurred before or after the execution of such will.  Upon dissolution of marriage, the will shall be construed as if the spouse died at the time of the dissolution of marriage.  Revocable Trust Provisions that “Affect” an Ex-Spouse Are Void on Divorce: Update Beneficiary Designations. The same result applies to provisions of revocable trusts that “affect” a settlor’s ex-spouse. Unless an exception to automatic revocation applies, Florida law voids revocable trust provisions that “affect” a former spouse. Therefore, when reviewing estate planning, divorcing employees should update beneficiary designations under revocable trusts. Section 736.1105(2), Florida Statutes, amended effective July 1, 2021 (Laws of Florida 2021-183), provides: (2) Any provision of a revocable trust that affects the settlor’s spouse is void upon dissolution of marriage of the settlor and the spouse, whether the marriage occurred before or after the execution of such revocable trust.  Upon dissolution of marriage, the revocable trust shall be construed as if the spouse died at the time of the dissolution of marriage.  Courts Broadly Interpret What “Affects” an Ex-Spouse But what does “affect” an ex-spouse mean? Courts interpret “affects” broadly.  See what the court did in Carroll v. Israelson, 169 So. 3d 239 (Fla. 4th DCA 2015) (followed in Galazka v. Estate of Perkins, 184 So. 3d 635 (Fla. 4th DCA 2016)). For provisions to “affect” an ex-spouse, they don’t need to benefit the former spouse directly. For example, in Carroll v. Israelson, the court held the statute invalidated will provisions establishing trusts for the decedent’s ex-wife’s relatives. Because such provisions “affected” her, they were invalid upon divorce. Read more here. When Employees Don’t Update Beneficiary Designation Forms after Divorce Assets covered under Section 732.703, Florida Statutes will pass as if the decedent’s ex died when they divorced. This statute may affect certain employee benefits. An employer learns about the Florida employee’s divorce. The employer may consider notifying the employee about updating beneficiary designation forms after divorce. How it Plays Out: Life Insurance Beneficiary Designations (Section 732.703) A former husband names his ex-wife as primary beneficiary on the beneficiary designation form for his life insurance policy. She claims benefits under the policy. But, following their divorce, he never updates his beneficiary designation form. Relying on Section 732.703, Florida Statutes, the life insurance company may review the insured’s marital status on the death certificate and may pay out the proceeds. The company may make these payment decisions and avoid the delay and expense of an interpleader action. Example Scenarios First Example: Single, Divorced, or Married to Someone Else. The death certificate states the decedent was unmarried at death. It lists the marital status as “Single” or “Divorced” or “Married” (to someone other than the former spouse). Unless a statutory exceptions applies, Section 732.703(5) authorizes a payor to pay the secondary beneficiary.  Second Example: Insured Decedent Was Married to the Named Beneficiary  The death certificate states the decedent was married to the spouse named as the primary beneficiary. The payor/insurer won’t be liable for paying on account of, or transferring an interest in, the asset to the primary beneficiary. Third Example: Beneficiary Designation Form Doesn’t State the Relationship With the Beneficiary Now, suppose the governing instrument names a beneficiary, but doesn’t specify the relationship between the decedent and named beneficiary. Or, the instrument explicitly provides the beneficiary is not the decedent’s spouse. The payor/insurer won’t be liable for paying on account of, or transferring an interest in, the asset to the named beneficiary. Fourth Example: Silence About Marital Status What if the death certificate is silent about the decedent’s marital status at the time of death? The payor is not liable for paying on account of, or for transferring an interest in, the asset to the primary beneficiary. The primary beneficiary must deliver to the payor an affidavit in substantially in the form set forth in Section 732.703(5)(b), Florida Statutes. Divorcing employees should update their beneficiary designations in policies, trusts, and wills that “affect” their ex.  If they fail to do so, death benefits may go to someone whom the employee didn’t intend. ________ Section 732.703, Florida Statutes: Automatic Revocation of Beneficiary Designations on Divorce Section 732.703(2), Florida Statutes applies to decedents who die after July 1, 2012, regardless of when they made a beneficiary designation. The statute applies to the following assets in which a Florida resident has an interest at death: (a) A life insurance policy, qualified annuity, or other similar tax-deferred contract held within an employee benefit plan. (b) An employee benefit plan. (c) An individual retirement account, including an individual retirement annuity described in section 408(b) of the Internal Revenue Code of 1986. (d) A payable-on-death account. (e) A security or other account registered in a transfer-on-death form. (f) A life insurance policy, annuity,

Remind Divorced Employees to Update Beneficiary Designations Read More »

Orange Red and Yellow Tulips with Sky. Revocation on Divorce of Beneficiary Designations

Divorce and Beneficiary Designations — Florida Statutes §732.703

Beneficiary Designations, Collaborative Divorce /

Introduction  How does divorce affect your beneficiary designation of your ex when you die?  Multiple assets covered under Florida’s automatic revocation statute, Section 732.703, Florida Statutes, pass as if your surviving ex-spouse died first. How it Plays Out: Life Insurance Beneficiary Designations A former wife named as primary beneficiary on her former husband’s life insurance policy claims benefits. Following their divorce, however, he never changes his beneficiary designation. Relying on Section 732.703, Florida Statutes, the life insurance company may review the insured’s marital status on the death certificate and pay out the proceeds. The company may avoid the delay and expense of an interpleader action. How does this work? Example Scenarios First Example: Single, Divorced, or Married to Someone Else The death certificate states the decedent was unmarried at death. Or, it lists the marital status as “Single” or “Divorced” or “Married” (to someone not the ex). Unless a statutory exceptions applies, Section 732.703(5) authorizes paying the secondary designated beneficiary. Second Example: Insured Decedent Was Married to the Person Designated as Beneficiary The death certificate states the decedent was married to the spouse named as the primary designated beneficiary. The payor/insurer won’t be liable for paying on account of, or transferring an interest in, the asset to the primary beneficiary. Third Example: Designation Form Doesn’t State the Relationship With the Beneficiary Now suppose the governing instrument has a beneficiary designation, but doesn’t specify the relationship between the decedent and named beneficiary. Or, the instrument explicitly provides the beneficiary is not the decedent’s spouse. The payor/insurer can pay on account of, or transfer an interest in, the asset to the named beneficiary. Fourth Example: Silence About Marital Status What if the death certificate is silent about the decedent’s marital status? The payor isn’t liable for paying the primary beneficiary as the decedent designated. The primary beneficiary must deliver to the payor an affidavit in substantially in the form set forth in Section 732.703(5)(b), Florida Statutes. The Law Before Section 732.703 Florida law voided a provision of a will that affected a decedent’s spouse upon the dissolution of the marriage. The person died but never changed the will following divorce. Florida law treated the former spouse named in the will as if the surviving ex-spouse predeceased the decedent. But the same wasn’t true for non-probate or non-trust assets, such as a life insurance policy. Before section 732.703 was enacted, courts considered if marital settlement agreements specified who would or wouldn’t receive death benefits under a will or life insurance policy. General language in agreements was insufficient to override plain language of beneficiary designations. See Crawford v. Barker, 64 So. 3d 1246 (Fla. 2011); Cooper v. Muccitelli, 682 So. 2d 77 (Fla. 1996); Luscz v. Lavoie, 787 So. 2d 245 (Fla. 2d DCA 2001); Smith v. Smith, 919 So. 2d 525 (Fla. 5th DCA 2005). Applicability of Section 732.703(2), Florida Statutes Section 732.703(2), Florida Statutes provides: 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. The amended statute applies to decedents who die after July 1, 2012, regardless of when they made a beneficiary designation. The statute applies to the following assets in which a Florida resident has an interest at death: (a) A life insurance policy, qualified annuity, or other similar tax-deferred contract held within an employee benefit plan. (b) An employee benefit plan. (c) An individual retirement account, including an individual retirement annuity described in section 408(b) of the Internal Revenue Code of 1986 (d) A payable-on-death account. (e) A security or other account registered in a transfer-on-death form. (f) A life insurance policy, annuity, or other similar contract that is not held within an employee benefit plan or a tax-qualified retirement account. The Automatic Revocation-Upon-Divorce Statute Doesn’t Apply if the Decedent Gave Away the Decedent’s “Interest in the Asset.” For the automatic revocation-on-divorce statute to apply, the decedent’s interest in an asset covered by the statute must exist when the decedent and former spouse divorced. Otherwise, there is no “interest in the asset” the decedent has to which the beneficiary designation attaches. See Dargan v. Federated Life Insurance Company, Case No. 22-14284-CIV-CANNON/McCabe (SD Florida October 13, 2022). Dargan v. Federated Life Insurance Company While married, the insured named his former wife beneficiary on a life insurance policy. When the couple separated, he made an oral gift (parol gift) of the policy to her. She became the owner and beneficiary of the policy. She kept paying the premiums. They divorced in St. Lucie County, Florida. She continued paying the premiums until he died. After he died, she claimed benefits under the life insurance policy. But the insurance company denied her claim and moved to dismiss her breach of contract lawsuit. Federated said she had no standing to bring the action. Once the parties divorced, the company argued, section 732.703(2)(f), Florida Statutes automatically revoked the life insurance beneficiary designation.  Florida’s revocation-upon-divorce statute:  “establishes a default rule that, as to any ‘interest in an asset,’ any ‘designation’ made by one spouse for the benefit of the other spouse becomes void as of the date of the judicial dissolution of the marriage. See § 732.703(2), Fla. Stat. The statute provides numerous exceptions that allow spouses to reverse the effect of this default rule by, for example, specifying the ownership fate of their assets as part of the judicial dissolution, or re-stating asset designations following the date of the divorce. See § 732.703(4), Fla. Stat. (listing exceptions).” In the September 28, 2022 Report and Recommendation, the Magistrate Judge reasoned the statute applies only to designations made regarding a decedent’s interest in an

Divorce and Beneficiary Designations — Florida Statutes §732.703 Read More »

Waves crashing on sandy beach green water blue sky. Text reads 'Collaborative Divorce Agreements. Checklist for Beneficiary Designations'

Beneficiary Designations Checklist for Collaborative Teams

Beneficiary Designations, Collaborative Divorce /

This Beneficiary Designations Checklist for collaborative teams can help couples develop options for beneficiary designations after divorce. Collaborative Practice teams may use the checklist when one spouse may want the other named as beneficiary of insurance policies, annuities, accounts, or other assets. The couple and their Collaborative Practice team may follow the checklist work towards Collaborative marital settlement agreements and beneficiary designations that achieve their goals. For example, the couple may decide securing alimony or child support protects their family if the spouse owing support dies. Then, life insurance, trust provisions, or will provisions naming the ex-spouse as beneficiary may work for them. That’s why the collaborative team’s going through the Beneficiary Designations Checklist may help the family develop options. As the team discusses options, they can consider how best to avoid automatic revocation statutes like Florida’s: Beneficiary Designations Checklist Collaborative Marital Settlement Agreements and Overriding Automatic Revocation Florida favors settlement agreements. In this favorable environment, harnessing their power and freedom to contract, collaborating couples and their team may consider language for overriding Florida’s automatic revocation upon divorce. For more information about Collaborative Divorce and beneficiary designations, contact Michael P. Sampson.

Beneficiary Designations Checklist for Collaborative Teams Read More »

Collaborative Allied Professionals Insurance Experts

Collaborative Marital Settlement Agreements: Insurance Policies

Beneficiary Designations, Collaborative Divorce /

On divorce, Florida law automatically revokes insurance policy beneficiary designations in favor of an ex-spouse. But, to avoid automatic revocation on divorce, you and your spouse may say in your collaborative marital settlement agreement you intend to designate one or the other as beneficiary. Otherwise, on entry of a final judgment of dissolution of marriage, most insurance policy beneficiary designations of an ex-spouse end. Therefore, consider overriding automatic revocation of beneficiary designations under insurance policies. After divorce, you may want the insured policy holder to redesignate a spouse as beneficiary. For example, you may decide you’d like to secure alimony or child support with life insurance. To achieve that goal, keeping your ex-spouse as beneficiary may make sense. Florida’s Automatic Revocation Statutes – Life Insurance and Accounts, Wills, and Revocable Trusts Florida Statutes Section 732.703 of the Florida Probate Code revokes on divorce designations of an ex-spouse under financial instruments such as life insurance policies, individual retirement accounts (IRAs), and pay on death accounts. For further discussion, read how the statute applies and exceptions here. As your collaborative divorce team considers automatic revocation of insurance policy designations on divorce, it should also consider related statutes that affect other instruments. First, section 732.507, Florida Statutes, also in the Florida Probate Code, applies to will provisions that affect an ex-spouse.   Second, section 736.1105, Florida Statutes, in the Florida Trust Code, applies to designations of an ex-spouse under revocable trusts. The Florida Legislature amended both sections effective July 1, 2021. See Laws of Florida 2021-183. Statewide Automatic Revocation Statutes Here is a chart of state automatic revocation statutes. Florida is one of 27 states with an automatic revocation on divorce statute substantially similar to the Uniform Probate Code’s Section 2-804. To read Section 2-804, please click here. See Ala. Code § 30-4-17; Alaska Stat. § 13.12.804; Ariz.Rev.Stat. § 14-2804; Colo.Rev.Stat. § 15-11-804; Haw.Rev.Stat. § 560:2-804; Idaho Code § 15-2-804;  750 ILCS Illinois Marriage and Dissolution of Marriage Act 5/503(b-5)(2) (life insurance policies) and 755 ILCS 5/4-7(b) (wills); Iowa Code § 598.20A, Iowa Code § 598.20B, and Iowa Code §633.271; Mass. Gen. Laws, ch. 190B, § 2-804; Mich. Comp. Laws Ann. § 700.2806 and Mich. Comp. Laws Ann. § 700.2807; Minn. Stat. § 524.2-804 subd. 1; Mont. Code Ann. § 72-2-814; Nev. Rev. Stat. § 111.781; N.J. Stat. Ann. § 3B:3-14; N.M. Stat. Ann. § 45-2-804; N.Y. Est., Powers & Trusts Law Ann. § 5-1.4; N.D. Cent. Code § 30.1-10-04; Ohio Rev. Code § 5815.33; 20 Pa. Stat. and Cons. Stat. § 6111.2; S.C. Code § 62-2-507; S.D. Codified Laws § 29A-2-804 ; Tex. Fam. Code § 9.301 and Tex. Fam. Code § 9.302 (retirement benefits and financial plans); Utah Code § 75-2-804; Va. Code § 20-111.1 ; Wash. Rev. Code § 11.07.010; Wis. Stat. § 854.15. US Supreme Court Sveen v. Melin Decision But are these automatic revocation statutes constitutional?  After considering the question in Sveen v. Melin, 138 S. Ct. 1815 (June 11, 2018), the US Supreme Court answered “yes.” In Sveen, the Supreme Court held Minnesota’s statute (similar to Florida’s) automatically revoking certain insurance beneficiary designations did not unconstitutionally impair contracts. The Court further held, as applied to life insurance beneficiary designation signed before the Minnesota’s statute became law, the statute did not violate the Contracts Clause of the United States Constitution. See Cazobon, Denise B. and Stashis, Alfred, Jr., Beneficiary Designations in Divorce: Lessons from Sveen v. Melin, Family Law Commentator, Fall 2018, p. 11. On remand, the Eighth Circuit Court of Appeals upheld awarding the policy proceeds to Mr. Sveen’s children, rather than to his ex-wife. See Metropolitan Life Ins. Co. v. Melin, 899 F. 3d 953 (8th Cir. 2018). See also Blalock v. Sutphin, 275 So. 3d 519 (Ala. 2018) (affirming trial court’s order that decedent’s daughter was the sole beneficiary of New York Life whole life insurance policy, because decedent’s designation of his ex-wife, before they divorced, as beneficiary was automatically revoked under Alabama’s revocation on divorce statute). Automatic Revocation on Divorce – Uniform Probate Code, Section 2-804 The Uniform Probate Code provision revokes upon divorce: See §§ 2‑804(a)(1), (b)(1), 8 U.L.A. 330, 330-331. Section 2-804 revokes rights of a former spouse (and the former spouse’s relatives) to take under wills (“testamentary” transfers) and revocable transfers a person provides for while alive (“intervivos transfers”). Intervivos transfers include beneficiary designations under revocable trusts, life insurance policies, or retirement plans. See General Comment, Part 8, Uniform Probate Code (1969) (Last Amended or Revised in 2019), National Conference of Commissioners on Uniform State Laws. UPC Rewrite in 1990: Expands Automatic Revocation to Will Substitutes The 1969 Uniform Probate Code underwent a rewrite in 1990. Before 1990, Section 2-508 revoked devises by will to a former spouse. In 1990, the Joint Editorial Board for the Uniform Probate Code (now the Joint Editorial Board for Uniform Trust and Estate Acts) and a special Drafting Committee to Revise Article II substantially revised Section 2-804. The revisers expanded the provision to “will substitutes,” such as revocable trusts, life insurance designations, retirement plan beneficiary designations, transfer-on-death accounts, and other revocable dispositions made before the divorce. See General Comment, Part 8, Uniform Probate Code (1969) (Last Amended or Revised in 2019), National Conference of Commissioners on Uniform State Laws. But, to avoid automatic revocation on divorce, what can collaborative teams do avoid consequences spouses don’t intend?  For more, read about options couples and their collaborative team might consider. Retroactivity of Automatic Revocation Upon Divorce Statutes Meier v. Burnsed – 2022 South Carolina Case Applies to Life Insurance Designation Made before Statute Took Effect In a case of first impression in South Carolina state courts, the Court of Appeals South Carolina applied an automatic revocation upon divorce statute similar to Florida’s. Meier v. Burnsed, 882 SE.2d 853 (Court of Appeals South Carolina 2022). The Facts The dispute was over $250,000 life insurance proceeds. A former husband’s brother and estate won the appeal and a reversal of summary judgment for the decedent’s ex-wife. The trial court incorrectly found South Carolina’s statute didn’t apply to revoke a

Collaborative Marital Settlement Agreements: Insurance Policies Read More »

Automatic Revocation of Will Provisions that Affect an Ex-Spouse

Beneficiary Designations, Collaborative Divorce /

Spouses should know Florida Statutes automatically revokes certain will provisions upon a final judgment of dissolution or annulment.  Florida’s automatic revocation on divorce statute section 732.507(2), Florida Statutes may void provisions of a will that “affect” a former spouse. After a Florida divorce, courts must administer and construe wills as if the former spouse had died at the time of the divorce. That’s true unless the will or the dissolution or divorce judgment provides otherwise. Invalidated Will Provisions – Carroll v. Israelson The court in Carroll v. Israelson applied the automatic revocation on divorce statute. It invalidated provisions of a will establishing trusts upon the decedent’s death to benefit his former wife’s relatives, because such provisions “affected” her. See Carroll v. Israelson, 169 So. 3d 239 (Fla. 4th DCA 2015) (followed in Galazka v. Estate of Perkins, 184 So. 3d 635 (Fla. 4th DCA 2016)). Even when attorneys advise clients to update their estate plans, people resist thinking about their own mortality. So, they often procrastinate post-divorce estate planning. Section 732.507(2), Florida Statutes: Automatic Revocation on Divorce of Will Provisions that Affect an Ex But the automatic revocation on divorce statute, section 732.507(2), Florida Statutes, protects an ex who procrastinated and didn’t update a will.  Specifically, the statute voids on entry of a final judgment of dissolution or annulment any provision of a will a married person made that “affects” a former spouse.  Read “affects” broadly, as the Carroll court did.  For a provision to “affect” a former spouse, the provision need not have a direct financial benefit on the former spouse. Class of Beneficiaries Tied to Marital Status: 2023 Minnesota Automatic Revocation Case So, Florida reads “affect” an ex-spouse broadly. Now what if the will provision doesn’t affect the ex-spouse directly, but provides for a gift to the decedent spouse’s “heirs-at-law”? That issue arose in Minnesota, which has a revocation-on-divorce statute like Florida’s. In the Matter of Estate of Tomczik, 992 N.W.2d 691 (Supreme Court of Minnesota July 5, 2023), an ex-wife’s parents took on the decedent’s siblings and personal representative. The testator signed the will in 1995. He named his then-wife as primary beneficiary with an alternate residuary clause leaving half his estate to his wife’s “heirs-at-law.” They divorced in 2019. He died in 2021 without updating his will. The Parties’ Positions The ex-wife’s parents objected to probate of the will identifying only the decedent’s siblings as heirs and devisees. The ex-wife’s parents argued the word, “wife,” was descriptive of one person, not limiting of the class of beneficiaries, so a gift to the heirs of the decedent’s “wife” didn’t fail merely because she was no longer his wife. In opposition, the personal representative argued, after the divorce, the automatic revocation statute caused the ex-wife to no longer be the decedent’s “wife” referred to in his will. Thus, they argued, that meant the class of his wife’s “heirs-at-law” was a class of zero.  The Ruling and Reasoning: “Wife’s Heirs” Limiting, Not Merely Descriptive The trial court ruled the devise to her heirs failed under Minnesota’s automatic revocation on divorce statute. See Minnesota Uniform Probate Code, Minn. Stat. § 524.2-804, subdivisions 1-2. A split appeals court reversed. In re Est. of Tomczik, 976 N.W.2d 143 (Minn. App. 2022). The Minnesota Supreme Court reversed the appellate court. The Minnesota Supreme Court reasoned: Descriptive Not Limiting: Named Individuals In contrast, consider cases in which courts have deemed a relational term to be merely descriptive and not limiting. In re Will of Dezell, 194 N.W.2d 190 (Minn. 1972)  – “to my daughter-in-law, Margaret Dezell,” entitled the former daughter-in-law to take despite the dissolution of her marriage. In re Est. of Kerr, 520 N.W.2d 512 (Minn. App. 1994) – a bequest to “my stepdaughter, Dawn M. Valentine” was not rendered invalid by the testator’s dissolution of marriage, which meant that Dawn M. Valentine was no longer his stepdaughter, because “stepdaughter” was a descriptive term rather than a limiting term. In re Estate of McGlone, 436 So. 2d 441 (Fla. 4th DCA 1983) – “husband” or “wife” are descriptio personae when he or she is named and also described as husband or wife. Descriptio personae means a description of a person to identify someone in a legal instrument.  In re Application of Carleton, 432 N.Y.S.2d 441 (N.Y. Surr. Ct. 1980) – after dissolution, language that bequeathed items to “my nephew and wife, Carl R. Baker and Helen L. Baker” entitled the former wife to take under the will.  Timing Matters: No Revocation on Divorce When the Will Predates the Marriage The statute does not revoke provisions of a will executed by a single person; it applies only when the marriage predates the will. In Gordon v. Fishman, 253 So. 3d 1218 (Fla. 2d DCA 2018), a man did not marry his fiancée he designated in his will as beneficiary until 15 months after he signed it. Their later divorce did not invalidate the beneficiary designation under 732.507(2), Florida Statutes. Carroll held the date of dissolution or annulment triggers the statute.  The statute won’t allow “post-death legal gymnastics to manipulate the issue of whether a will provision ‘affects’ the former spouse.” Exceptions to Automatic Revocation on Divorce of Will Provisions Exceptions to automatic revocation on divorce of will provisions include: By updating beneficiary designations in wills and other instruments upon divorce or annulment, parties may avoid leaving their survivors costly, acrimonious, drawn out litigation. In Collaborative Divorce, to overcome automatic revocation on divorce, spouses may harness their power to contract and reach creative agreements about beneficiary desigations. For more information, contact Michael P. Sampson today. Read how Collaborative Marital Settlement Agreements May Handle Automatic Revocation on Divorce of Insurance Beneficiary Designations. Statewide Chart of Automatic Revocation Statutes Related Blog Articles

Automatic Revocation of Will Provisions that Affect an Ex-Spouse Read More »

Father holding hand of son walking in field blue cloudy sky. Collaborative Marital Agreements Beneficiary Designations after Divorce

Collaborative Marital Agreements — Beneficiary Designations After Divorce

Beneficiary Designations, Collaborative Divorce /

Florida law revokes on divorce beneficiary designations that “affect” an ex-spouse.  For more, read here, here and here. Therefore, to avoid automatic revocation of beneficiary designations on divorce, Collaborative Marital Settlement Agreements should address interests in: assets subject to beneficiary designations under wills (section 732.507(2), Florida Statutes)  assets subject to beneficiary designations under life insurance policies (Section 732.703, Florida Statutes) retirement plans employee benefit plans assets subject to pay-on-death or transfer-on-death designations. Spouses may want to maintain after divorce one or both as designated beneficiaries of assets. Indeed, sometimes that’s important to benefit their children, secure alimony, or achieve other purposes. Collaborative Marital Settlement Agreements – Identifying Assets Having Beneficiary Designations Among other things, the Collaborative Marital Settlement Agreement (or “collaborative resolution agreements”) should: (1)  identify each asset subject to a beneficiary designation or transfer-on-death treatment; (2) specify who will retain the asset; (3) provide if the owner must designate or continue to designate the other spouse as a beneficiary; or (4) state the spouse retaining the asset may dispose of it with no restrictions. Continuing Beneficiary Designations in Wills After Divorce Will beneficiary designations continue after divorce? If so, the collaborative team may find workable provisions express the parties’ intent. Below is language modified from the Florida Supreme Court approved marital settlement agreements. Florida Supreme Court Approved Language – Beneficiary Designations After Divorce Beneficiary Designation The designation providing for the payment or transfer at death of an interest in assets to or for the benefit of the __________ (name of spouse) SHALL NOT BE VOID as of the date of entry of the Final Judgment of Dissolution of Marriage, which shall provide that the designation will remain in full force and effect. __________ (name of spouse) shall acquire or maintain the following assets for the benefit of __________ (name of the other spouse or child(ren)) to be paid upon his/her death outright or in trust. This provision only applies if other assets fulfilling such requirement for the benefit of the other spouse or child(ren) do not exist upon his/her death and unless precluded by statute. {Describe the assets with specificity}: __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________. __________ (name of spouse) shall not unilaterally terminate or modify the ownership of the following assets, or their disposition upon his/her death. {Describe the assets with specificity}: ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________. ⇒  Next section: Automatic Revocation of Will Provisions that Affect an Ex-Spouse on Divorce Related Blog Articles Questions About Post-Divorce Designations? For questions about options for handling beneficiary designations in your Florida Collaborative Divorce, contact Michael P. Sampson.

Collaborative Marital Agreements — Beneficiary Designations After Divorce Read More »

Survivor’s Rights on Domestic Partner’s Death

Beneficiary Designations, Property Distribution, Relationship Agreements /

This fifth installment of a 7-part series about Domestic Partnership Agreements discusses survivor’s rights on death. Florida law provides for survivor’s rights if a married person dies before the other spouse and they have no premarital or postnuptial agreement.  But for unmarried domestic partners, Florida law provides no survivor benefits upon the decedent’s death.  Through careful planning and drafting of a domestic partnership agreement, however, partners can achieve similar financial rights on death. Elective Share – Create Equivalent Survivor’s Rights for Domestic Partners? A survivor’s right available to a surviving spouse, but not to unmarried couples, is the “elective share.”  See section 732.201-732.2155, Florida Statutes. The elective share is a surviving spouse’s right to a share of the decedent’s estate no matter what the will provides.  A marrying or married party may waive that right.  Florida law specifies the property included in the “elective estate.”  The amount of the elective share is generally 30 percent of the “elective estate.” For example, for married couples, if a spouse’s will provided the other spouse would get $100,000 upon death, and the rest of the wealth, money, and property would go into a trust for someone other than the surviving spouse, but the decedent’s “elective estate” calculated under Florida law were worth $1 million, the surviving spouse could elect to take $300,000. Options for Survivor Death Benefits of Domestic Partner To provide for survivor’s rights, domestic partners may use definitions similar to those for the spousal elective share. Their agreement could provide for irrevocable commitments that the survivor partner would share in the decedent’s estate.  These irrevocable commitments for survivor death benefits would stand, regardless of what a later will were to provide. The draft agreement could lay out alternative provisions for either party to consider: There will be a partial waiver and release of property and estate rights and a specific waiver of any right to include the value of the interests in trusts in a partner’s share upon the other’s death. Both parties will waive and release property and other estate rights upon the other’s death. Absent later different written arrangements, there will be specific irrevocable rights in the other party’s estate upon the party’s death. Related Blog Posts Read more about Florida Domestic Partnership Agreements:    Domestic Partnership Agreements: Overview Domestic Partnership Agreements: The Home and Joint Expenses Domestic Partnership Agreements: Separate and Joint Property Support When the Relationship Ends Domestic Partnership Agreements: Financial Disclosures and Privacy Domestic Partnership Agreements: FAQs

Survivor’s Rights on Domestic Partner’s Death Read More »

Collaborative Divorce: Dividing Retirement Accounts

Beneficiary Designations, Collaborative Divorce, Property Distribution /

The Challenge: In collaborative divorce, dividing retirement accounts can be tricky.  Collaborative teams, usually with a neutral collaborative financial professional’s help, must often figure out premarital and marital components of retirement assets.  How might the collaborative team approach the challenge? Premarital Accounts Calculator: One tool that may be useful as the collaborative team develops options for allocating the marital and nonmarital components of premarital individual retirement accounts (IRAs), investment accounts, and other plans: Florida Law on Marital and Nonmarital Retirement Assets: State law guides treatment of marital and nonmarital retirement assets. In Florida, marital assets include: The enhancement in value and appreciation of nonmarital assets resulting from either party’s efforts during the marriage, and The enhancement in value and appreciation of nonmarital assets resulting from the contribution to or expenditure on nonmarital assets of marital funds or other forms of marital assets, or both. See 61.075(6)(a)1.b., Florida Statutes. Marital assets also include all vested and nonvested benfits, rights, and funds accrued during the marriage in retirement, pension, profit-sharing, annuity, deferred compensation, and insurance plans and programs. See 61.075(6)(a)1.d., Florida Statutes. Nonmarital assets include assets acquired prior to the marriage and acquired in exchange for such assets.  61.075(6)(b), Florida Statutes. Valuation Dates: In divorce cases, judges may exercise discretion as circumstances require to determine the valuation date or dates for valuing assets as the judge determines is just and equitable under the circumstances.   61.075(7), Florida Statutes.  Dividing retirement accounts is subject to the judge’s discretion. However, dates the judge selects may or may not achieve the divorcing couple’s individual or mutual interests. To take back control, collaborating couples may select dates for valuing and dividing retirement accounts they believe best reflect their agreement about fairness and best achieve their interests. Helpful Documents: To help the financial neutral and collaborative team, the retirement account owner should get statements showing (1) the balance of the retirement account closest to the date of marriage, (2) the balance on the date of separation, and (3) the balance currently.  It would help to know the participant’s contributions to the account during the marriage. Dividing Retirement Accounts: Time Rule (Coverture) Fraction: Florida courts use a “coverture fraction” or  formula to determine the marital portion of a retirement or pension fund. Parry v. Parry, 933 So. 2d 9 (Fla. 2d DCA 2006). This process identifies and allocates contributions a spouse made to an asset based on when the spouse made them. Example for Dividing Retirement Accounts in Collaborative Divorce. For example, suppose the asset being divided is a spouse’s interest in a 401(k) Plan.  Consider if multiplying the coverture fraction, determined as of the date of separation, to the most current balance or the balance on a different date makes sense. To give the parties their fair share of ups and downs in the market since separation, determine the marital portion as of the agreed valuation date.  This approach is consistent with case law. See Byers v. Byers, 910 So. 2d 336 (Fla. 4th DCA 2005) (Abuse of discretion to value husband’s 401(k) retirement account as of date of petition where asset passively appreciated nearly $70,000 between filing date and date of hearing). Dividing the Dough: Retirement Accounts Imagine a ball of unbaked dough. Split each party’s half of the marital dough ball as of the date of separation. Stick their portions in the fridge. Both portions will rise (or deflate). When it’s time to bake, each party gets his or her separated dough ball representing the marital piece. The participant gets an additional ball, plus the amount it has risen or deflated, reflecting premarital contributions. Calculate a “coverture” or “time rule” fraction.  The numerator is the time the participant was married while participating in the Plan. The denominator is the total time the participant has in the Plan. To get a starting number of the marital value, multiply the fraction and the Plan’s current value (or, if the parties agree, value on a different date, such as their separation date). That will yield the total present value of the retirement fund accruing during the marriage.  The rest is allocable to the participant as nonmarital. This piece would comprise the premarital balance contributed plus passive growth on that amount during the marriage. Collaborative Divorce: Couples May Consider Fair Options for Dividing Retirement Accounts. Now think about marital amounts net of joint expenses or debts paid with the marital portion of the retirement account. It would be fair for each to benefit from gains or losses through the account’s division. The parties may agree differently. In the usual case, the participant doesn’t actively manage the retirement plan of the employer, so there is no need to distinguish between enhancement from marital efforts and enhancement from passive forces, such as because of a bull market. In litigated cases when enhancement comprises both active and passive pieces, the spouse claiming entitlement to enhancement of premarital contributions is passive, therefore also nonmarital, bears the burden of showing market growth by proving a relevant index (e.g., an industry Standard & Poor’s 500 Index) for measuring growth. Unless there’s a basis for unequal distribution of marital assets, splitting 50-50 the marital pie would be fair, but, to achieve their goals, in the collaborative process, the parties may agree to split other than 50-50. Interesting Florida Case Law on Dividing Retirement Assets for Collaborative Practitioners: First District Schroll v. Schroll, 227 So. 3d 232 (Fla. 1st DCA 2017) – Sums diminished during dissolution proceedings for purposes reasonably related to the marriage – paying living expenses, attorneys, debts, moving expenses – should not be included in an equitable distribution scheme. Second District McNorton v. McNorton, 135 So. 3d 482 (Fla. 2d DCA 2014) – Without evidence of the composition of the retirement investments, the increase in a Standard and Poor’s index proved nothing. Horton v. Horton, 62 So. 3d 689 (Fla. 2d DCA 2011) – To determine the amount a retirement or pension fund accumulated during the marriage, the trial court “creat[es] a fraction where the numerator is the amount of time the employee was

Collaborative Divorce: Dividing Retirement Accounts Read More »

MENU

Terms and Conditions - Privacy Policy