Divorce can impact your financial planning in various ways, including affecting your estate plan. Whether you're in the midst of a divorce, recently finalized one, or are simply seeking to understand the potential implications, understanding how divorce intersects with estate planning is crucial for safeguarding your financial future and legacy. In this blog, we discuss laws that determine divorce's effects on your estate plan and actions you can take to protect your assets.
Does a Divorce Decree Override a Will?
In Florida, a divorce decree can override certain will provisions, particularly those related to the former spouse. Florida Statute 732.507(2) states that any provision of a will that affects the testator's spouse becomes void upon divorce or annulment of the marriage. This applies to provisions that:
- Leave property to the spouse
- Name the spouse as a personal representative
- Confer any power of appointment on the spouse
The statute treats these provisions as if the former spouse had predeceased the testator. This means that after a divorce, any bequests to the ex-spouse or appointments of the ex-spouse as a personal representative are automatically revoked by operation of law.
It's important to note that this statute only affects provisions related to the former spouse. Other parts of the will remain valid and in effect.
What Happens to a Revocable Trust in a Divorce?
Under Florida Statute § 736.1105, upon a divorce or annulment, any provisions in a revocable trust that affect the settlor's former spouse become void, operating as if the former spouse had died on the date of the divorce. The trust will be void whether it was created before or after your marriage. Just like with wills, this automatic revocation applies to provisions that distribute assets to the former spouse, grant them powers of appointment, or nominate them to fiduciary roles such as trustee or personal representative.
However, this automatic revocation is not absolute. The trust can remain valid if it expressly provides for the former spouse's continued benefit post-divorce, if the divorce judgment or court order specifically states otherwise, or if the couple remarries.
Also, if the settlor modifies the trust after the divorce to include the former spouse, those new provisions will be valid. It is important to note that this statute only affects revocable trusts; irrevocable trusts are not subject to these automatic changes.
Other Ways Divorce Impacts Your Estate Plan
You should also be aware that divorce affects the following assets as well:
- Transfer on death assets: According to Florida Statute § 732.703, a divorce or annulment generally nullifies any beneficiary designation made by the decedent in favor of their former spouse for assets covered under this law. This automatic revocation applies to various financial instruments, including life insurance policies, annuities, and pay-on-death accounts.
- Joint ownership: Prior to a divorce, property owned by both spouses is typically classified as being owned as tenancy by entirety (TBE). After a divorce, TBE agreements typically convert to being tenancy in common. The difference is that tenancy in common agreements does not have survivorship rights, and ownership does not pass to the other owner in the event of death.
- Durable powers of attorney: When you file for divorce, your spouse’s ability to serve as your agent because of a power of attorney is nullified. Under Florida Statute § 709.2109, unless your power of attorney specifies otherwise, an ex-spouse cannot be an agent, and they lose their right as soon as a divorce action is filed.
Revising Your Estate Plan After a Divorce
It is in your best interest to amend your estate plan and account designations immediately following or during a divorce. You should also take the following actions:
- Review and update your will. While Florida law automatically revokes certain provisions related to your ex-spouse, it's important to review your will entirely and make necessary updates.
- Modify your revocable trust. If you have a revocable trust, review and amend it to reflect your changed circumstances and intentions.
- Update beneficiary designations. Review and update beneficiary designations on life insurance policies, retirement accounts, and other financial accounts.
- Revoke and create new powers of attorney: Establish new financial and healthcare powers of attorney, designating trusted individuals to make decisions on your behalf.
- Reassess your assets: Take stock of your current assets and how they may have changed due to the divorce settlement.
- Consider establishing new trusts: You may want to create new trusts to protect assets for children or other beneficiaries.
- Revisit your healthcare directives: Update your living will and other healthcare documents to reflect your current wishes.
- Consider who you have named as executor: If your ex-spouse is the executor of your estate, you may want to consider whether you still think they are up to the task.
- Consult with professionals: Work with an estate planning attorney and financial advisor to ensure your plan is comprehensive and legally sound.
Taking these steps will help safeguard your assets and ensure your estate plan accurately reflects your post-divorce situation. While Florida law provides some automatic protections, a thorough review and update of your estate plan is crucial to fully align it with your new circumstances and intentions.
For answers to your questions about divorce and estate planning, contact Dorcey Law Firm, PLC at (239) 309-2870.