Beneficiary designations are legal instructions that determine who will receive certain assets or benefits upon the death of the account holder or policyholder. Common examples include life insurance policies, retirement accounts such as 401(k)s and IRAs, payable-on-death (POD) bank accounts, and investment accounts. These designations supersede any directives outlined in a will or trust, making them powerful instruments in estate planning.
In the context of divorce, beneficiary designations can have significant implications, especially if they are not updated to reflect changing circumstances. Consider a scenario where an individual designates their spouse as the primary beneficiary on their life insurance policy and retirement accounts. In the event of divorce, Florida law may automatically revoke the ex-spouse's designation as a beneficiary upon divorce. Florida Statutes Section 732.703 provides:
(2) 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. An individual retirement account described in s. 408 or s. 408A of the Internal Revenue Code of 1986, or an employee benefit plan, may not be treated as a trust for purposes of this section.
(3) Subsection (2) applies to the following assets in which a resident of this state has an interest at the time of the resident’s 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 described in s. 408 or s. 408A of the Internal Revenue Code of 1986, including an individual retirement annuity described in s. 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, and (f) life insurance policy, annuity, or other similar contract that is not held within an employee benefit plan or a tax-qualified retirement account.
However, the applicable Florida statute providing for the automatic revocation of beneficiary designations upon divorce does not apply universally. There are various instances in which the statute does not apply. For example, certain accounts or policies may be governed by federal law or contractual agreements, which might override the statute.
The failure to update beneficiary designations can lead to legal disputes. Intended beneficiaries, such as children or new spouses, may be deprived of benefits, which can lead to a conflict with the ex-spouse. In this situation, the company holding the benefits, such as a life insurance company, may be forced to file a lawsuit called an interpleader so that a court can determine the rightful beneficiary.
Please contact Joel Ewusiak for legal assistance with your specific matter.