When getting divorced, it is always important to consider the implications of that divorce on your estate planning. If you get divorced and pass away shortly thereafter without changing your will, your recently divorced spouse will likely be enjoying your inheritance.
Dealing with changing a will is easy enough, but there are many other estate planning documents and financial instruments that can make even a simple divorce very complicated. In some cases involving high net worth individuals (who utilize trusts and other financial instruments) or in cases involving spouses who have a physical or mental handicap, failing to deal with these issues appropriately can have devastating consequences.
It is vital you have an attorney who can deal with these issues. Below is just s sample of some of the complicated issues that can arise in such circumstances.
Incapacity
Unfortunately it is a fact of life that sometimes people suffer accidents or injuries that leave them incapacitated. In some cases, a person's declining mental health can leave them incapacitated. When this happens and a divorce is filed or was already in progress, some special rules apply.
First, we have to look at what happens normally when a spouse becomes incapacitated. Often, the incapacitated party could create a durable power of attorney which simply gives the decision making powers of one party to another. The designated person is called the agent. A power of attorney does not have to be filed with the court but does require distinct formalities (signed by the principal, two witnesses, and notarized). The power of attorney is exercisable even if the principal becomes incapacitated. However, if the power of attorney is "nondurable" the power is extinguished upon incapacity.
Under Florida law, if a party names a spouse as an agent, the power of attorney terminates upon a filing of an action for dissolution or annulment of the marriage. It is important to note that if a spouse did not create a valid power of attorney prior to incapacitation, the spouse could still petition the court to be appointed guardian over her person and her assets. A spouse can declare who he/she prefers to serve as his or her guardian. If it is foreseeable that a person might become incapacitated in the near future, it is wise to appoint a guardian before problems increase.
Revocable Trust
In some cases, a person who is incapacitated has created a revocable trust. A revocable trust holds the spouse's assets and allows the spouse to access and use the assets for his/her benefit during life, and then passes to the named beneficiaries upon his/her death. Since the trust is revocable, the creator of the trust (settlor) has the ability to amend the trust and even serve as trustee. If the trust instrument does not address divorce, the spouse may be able to serve as trustee during and after divorce.
Healthcare Surrogate
A spouse may have designated a healthcare surrogate who would be able to make healthcare decisions for the principal in the case of incapacity. Generally, this designation is effective until revoked. If the spouse has named his or her soon to be ex-spouse, the designation should be revoked.
A spouse may also create a living will expressing his or her desires concerning life-prolonging procedures and may designate a surrogate within the document to execute his or her wishes. If a soon to be ex-spouse was named as the surrogate, the spouse should consider revoking the document. The revocation can be accomplished by verbal or written communication to either the surrogate or the healthcare provider. In the absence of an advance directive healthcare decisions for the incapacitated are made in the following order: judicially appointed guardian, or if none, the patients spouse. A spouse can plan around this order of priority by designating a healthcare surrogate.
Death of one party
What rights does a surviving spouse have if the other spouse dies while the dissolution of marriage petition is pending? In regards to the treatment of decedent's remains, the law allows anyone to carry out written instructions of the burial arrangements before a personal representative is appointed by court.
Jointly held assets such as bank accounts and real estate or securities held with rights-of-survivorship or tenants by the entirety pass automatically to the surviving joint tenant if one party dies while married. Upon the dissolution of the marriage, tenants by the entirety and joint tenants with rights-of-survivorship become tenants in common. This basically means that each party only shares a right to possession, and each is free to convey or sell their respective share.
Pay on death or transfer on death accounts
POD's or TOD's are bank accounts that can be designated to pay out or transfer, upon the death of the owner, to the person named as the beneficiary. A soon to be former spouse named as the beneficiary will remain the beneficiary even after divorce until the account is amended. This situation is analogous to Life Insurance Policy Proceeds and IRA's. If the decedent had an Employee Retirement Income Security Act (ERISA) retirement plan, the surviving spouse will be the beneficiary of at least 50% of the benefits.
Beneficiary under will or revocable trust
Generally, a surviving spouse will receive the share guaranteed to them by the decedent in his will or revocable trust. To prevent the distribution of assets to a soon to be ex-spouse a contingency provision could be included in the will or revocable trust requiring that a proceeding for dissolution must not be entered at the time of distribution. Equally, a spouse could also remove the soon to be ex spouse from the will or trust entirely.
Homestead
If title to a martial homestead is only in the name of one spouse, and that spouse dies, the surviving spouse will automatically receive a life estate in the homestead with a remainder to the deceased spouse's descendents. The only way to plan around this result is to have the spouse waive the homestead rights before the death of the owner. This can be done by a nuptial agreement.
Probate estate
If a spouse dies before her dissolution of marriage is final, the surviving spouse is still entitled to the probate estate. In Florida, a surviving spouse is statutorily entitled to a 30% share of decedent's elective estate. The decedent could have planned for this situation by using a contingent elective share trust. In effect, the trust would hold the property, and such property would not be considered part of the probate estate.
If a spouse dies intestate (without a will) in Florida, the surviving spouse will receive the entire estate if there are no children or if all of the decedent's children are the only children of the spouse. Additionally, the surviving spouse is entitled to exempt property and family allowances: household furnishings, net assets up to $20,000, two automobile, tuition plans and state pensions.
What can be done to Minimize Unintended Results
As soon as the spouse believes dissolution of marriage proceeding will be filed, he or she should remove the soon to be former spouse from and documents granting authority. In terms of Florida Statutory Spousal Rights, a full or partial waiver may be accomplished upon the death of a spouse or after a marriage is terminated. Full and partial waivers are also permitted in anticipation of separation, dissolution of marriage, or divorce.
If you are thinking about divorce and you are using any of the above instruments, contact one of our experienced family law attorneys today. We can help you protect yourself and your loved ones from the unintended consequences of failing to deal with these issues appropriately.
