Post-Divorce Planning: Problem or Opportunity?
May 2009
After a divorce, sitting down with financial professionals (and still more
lawyers) may be critical to ensuring that your estate plan benefits the right
people
After completing a painful process like a divorce, the last thing most people
want to do is sit down with lawyers and financial professionals to review their
financial planning.
Unfortunately, the need for this type of action after a divorce may be critical.
In the recent case of Trueblood v. Roberts, No. A-05-1084, the Nebraska Court of
Appeals outlined the consequences of failing to do such post-divorce planning.
Property Settlement Agreement Not Enough
In this case, a husband and wife
signed off on how to divide their assets through a property settlement
agreement. The divorce was finalized, and each party went their separate ways.
Later, the husband died. Unfortunately, he never changed his beneficiary
designation on his life insurance policy to someone other than his ex-wife. As a
result, the life insurance company paid the proceeds to the former spouse.
Here Comes the Lawsuit
The personal representative of the husband's estate
filed a lawsuit alleging that the divorce property settlement agreement provided
that the husband retain his own life insurance policy. The argument was simple.
The agreement referenced the existence of two life insurance policies and stated
that both parties would retain their respective policies as the property of each
individual.
While the court agreed that the life insurance policy belonged to the
ex-husband, it stated that the divorce decree and settlement agreement lacked
any language reflecting that the husband didn't intend that the wife could not
receive any death benefit if she was named the beneficiary of the policy.
Essential Planning Tip
The will and trust don't matter when it comes to
beneficiary designations.
The Nebraska court followed a general rule that the divorce does not affect the
beneficiary designation, only the ownership. Reading between the lines, one
could easily reach the conclusion that the ex-husband did not want his ex-wife
to receive the life insurance. The will obviously stated that, or the personal
representative would not have filed a lawsuit. However, the husband failed to
change the beneficiary to someone other than his ex-wife, and his wishes could
not be accomplished.
As a planning tip, remember that wills and trusts do not control beneficiary
designations. If the beneficiary is someone other than the estate or the trust,
the beneficiary designation controls the result. If that's the case, the intent
of the deceased may be ignored.
Adapted from the Daily Plan-It newsletter. Hoopes,
Adams & Alexander, PLC, is a Chandler, Arizona, law firm offering services to
Phoenix-area clients in the areas of estate planning, entity formation,
commercial and real estate transactions, and civil litigation. |
