Estate Planning Checklist for Florida Divorces

Almost everyone who has been divorced or is going through a divorce needs to revisit their estate planning documents.   While the divorce process attempts to equitably divide assets, it usually falls short of addressing the estate planning needs of clients.  In addition, it is prudent to revise estate planning documents during a divorce to ensure your wishes are carried out, as a contentious divorce can often last many years.

In most states, if you get divorced, a state statute automatically treats the ex-spouse as being pre-deceased in your documents.  See generally, Fla. Stat. §§ 732.507 And 732.703.  This means if you named a former spouse as a personal representative, executor, or as a beneficiary of your estate, they will be automatically removed.

What Problems Can Arise With No Estate Planning After Divorce?

Many people believe they can rely on such a statute to handle their estate planning documents.  There are multiple problems with this approach.  First, the statute only goes into effect upon divorce (if you pass during a multi-year divorce battle, everything may pass to your spouse regardless).  Second, certain retirement plans governed under a portion of Federal Law called the Employee Retirement Income Security Act also known as ERISA (such as 401K’s and pension plans) will preempt the state statute from taking effect.  See Egelhoff v. Egelhoff, 532 U.S. 141 (2001). Therefore, your ex-spouse may still inherit your retirement plan even after a divorce is final.

Another common issue is when a Decedent leaves all their assets to a minor child.  Most state laws require a guardianship until the minor is 18.  This is an expensive process and one of the unanticipated circumstance people fail to recognize is that the ex-spouse usually is appointed guardian.  While this may be acceptable under some circumstances, most individuals balk at the thought of their ex-spouse getting control over all the assets.  Therefore, it is strongly recommended that a client dealing with or already divorced set up a trust to handle any assets that may pass for the benefit of a minor.

In addition, some states such as Florida have unique restrictions on the devise of homestead.  For example, if you have minor children, you may be required to leave your homestead to them regardless of what your Will provides.  Just imagine the irony, you pass away leaving everything to your minor child, and then your ex-spouse moves into your home as the nominated guardian of your minor child.

Proper planning by anyone leaving you assets may also mitigate the effects of a future divorce.  By leaving assets in trust, it may be possible to ensure they are not counted against a party for equitable division.  It is important to see an attorney well versed in this area, as this is a constantly evolving area of the law.

These are just a few of the circumstances we often encounter when dealing with the estate of an individual who is in the process of a divorce or who has failed to update documents after a divorce.

Estate Planning Checklist for Florida Divorces

Here is a quick checklist to address some of the most prevalent issues:

  1. Update your Will and/or trust;
  2. Update your Durable Power of Attorney, Living Will, or Health Care Surrogate;
  3. Update your beneficiary designations on all accounts and insurance policies;
  4. Review how your cars are titled;
  5. Update and/or nominate a guardian for any minor children and for yourself;
  6. Ensure your house is properly titled and/or devised in your will;
  7. Review the titling of all financial accounts;
  8. Revoke all prior estate planning documents and powers of attorney;
  9. Ensure all post-divorce settlement requirement are handled (i.e. life insurance); and
  10. Speak with relatives (i.e. parents) to ensure their estate plans take into consideration your divorce.

Florida Statute Section 732.703

As reported in this Florida Senate Legislative White Paper, effective July 1, 2012 new F.S. 732.703 came into effect, accomplishing the following:

[F.S. 732.703] generally nullifies upon divorce or annulment the designation of a spouse as a beneficiary of nonprobate assets such as life insurance policies, individual retirement accounts, and payable on death accounts. State-administered retirement plans are exempt from [F.S. 732.703]. If the provisions of [F.S. 732.703] apply, an asset will pass as if the former spouse predeceased the decedent.

[F.S. 732.703] also specifies criteria for a payor of a nonprobate asset to use in identifying the appropriate beneficiary. [F.S. 732.703] specifically provides that the payor is not liable in some circumstances for transferring an asset to the beneficiary identified through the bill’s criteria.

*****

[F.S. 732.703] voids the designation of a former spouse as a beneficiary of an interest in an asset that will be transferred or paid upon the death of the decedent if: [1] The decedent’s marriage was judicially dissolved or declared invalid before the decedent’s death; and [2] The designation was made before the dissolution or order invalidating the marriage.

Click here for a link to the Florida Senate’s webpage for this new legislation and links to the actual text of the bill.

F.S. 732.703 is not all encompassing, it only applies to the following beneficiary-designated non-probate assets:

  • a life insurance policy, qualified annuity, or other similar tax-deferred contract held within an employee benefit plan;
  • an employee benefit plan;
  • an individual retirement account;
  • a payable-on-death account;
  • a security or other account registered in a transfer-on-death form; and
  • a life insurance policy, annuity or other similar contract that is not held within an employee benefit plan or tax-qualified retirement account.

F.S. 732.703 does NOT apply:

  • to the extent federal law provides otherwise;
  • if the governing instrument as defined in the bill expressly provides that the interest will be payable to the designated former spouse after the order of dissolution or order declaring the marriage invalid and the instrument expressly provides that benefits will be payable to the decedent’s former spouse;
  • to the extent the disposition of the assets are governed by a will or trust;
  • if a court order required the decedent to acquire or maintain the asset for the benefit of the former spouse or children of the marriage;
  • if under terms of the order of dissolution or order declaring the marriage invalid, the decedent did not have the ability to unilaterally terminate or change the beneficiary or pay-on-death designation;
  • if the designation of the decedent’s former spouse as beneficiary is irrevocable under applicable law;
  • if the contract or agreement is governed by the laws of another state;
  • to an asset held in two or more names as to which the death of one co-owner vests ownership of the asset in the surviving co-owner or co-owners [e., joint accounts]; or
  • if the decedent remarries the person whose interest would otherwise have been revoked as a former spouse under the bill and the decedent and that person are married to one another at the time of the decedent’s death.

Trap For The Unwary #1: Joint Survivor Accounts:

The F.S. 732.703 exception probate lawyers will want to focus on is for joint survivor accounts. Here’s what Jeff Baskies, one of Florida’s preeminent estate planning gurus, had to say about this issue:

Obviously, the most important and potentially controversial exception relates to joint accounts. A decision was made not to address those accounts in this context. While I believe Florida law currently provides that tenancy by the entireties accounts (which might otherwise be covered by [the joint-account exception] above) are converted to tenancies in common upon a divorce, I do not believe there is a similar rule for joint accounts with rights of survivorship. If this issue creates ongoing problems or a trap for the unwary, perhaps subsequent “clean-up” legislation will address joint accounts.

[Click here for Jeff’s entire commentary on the new statute].

Trap For The Unwary #2: Catch Me If You Can:

The second big point probate lawyers will want to keep in mind is enforcement. F.S. 732.703 is specifically designed to keep banks and insurance companies out of the line of fire if a family dispute erupts over any beneficiary-designated non-probate asset covered by the statute. If an ex-spouse swoops in and improperly cashes a life-insurance check before anyone is the wiser, you won’t be able to sue the insurance company, you’ll have to chase down the ex-spouse and sue him or her directly to get the money back.

Here’s how the statute’s “payor” immunity is described in this Florida Senate Legislative White Paper:

[F.S. 732.703] provides that in the case of pay-on-death accounts, securities or other accounts registered in transfer-on-death form, and life insurance policies, annuities or other similar contracts not held within an employee benefit plan or a tax-qualified retirement account, the payor is not liable for making any payment on account of, or transferring any interest in, such assets to any beneficiary.

A payor’s immunity for making a payment in accordance with the criteria in [F.S. 732.703] applies notwithstanding the payor’s knowledge that the person to whom the asset is transferred is different from the person who would own the interest due to the dissolution of the decedent’s marriage or declaration of the marriage’s validity before the decedent’s death. As such, a secondary beneficiary will have a cause of action against the former spouse who receives the payment or transfer of the assets described in [F.S. 732.703] if the beneficiary designations was made void upon divorce or annulment.

Trap For The Unwary #3: ERISA Trumps Florida’s Revocation Statute:

And finally, the last trap to keep in mind: a beneficiary designation in a pension plan or life insurance policy subject to federal regulation under the Employee Retirement Income Security Act (ERISA), is NOT subject to Florida’s new automatic revocation statute. For an in depth explanation — and critique — of the current state of the law on this point you’ll want to read Destructive Federal Preemption of State Wealth Transfer Law in Beneficiary Designation Cases: Hillman Doubles Down on Egelhoff, by Yale law Prof. John H. Langbein. Here’s an excerpt:

In Egelhoff v. Egelhoff, 532 U.S. 141 (2001), the Supreme Court held that when the instrument of transfer is a beneficiary designation in a pension plan or life insurance policy subject to federal regulation under the Employee Retirement Income Security Act (ERISA), the otherwise applicable state divorce revocation statute is preempted, even though ERISA makes no mention of divorce revocation. The Court reasoned that enforcing the state divorce revocation statute would “interfere with nationally uniform plan administration.”

Because the result in Egelhoff allowed supposed plan-level administrative convenience to defeat the principled objective of the divorce revocation statutes, a number of courts reacted by allowing so-called post-distribution relief, in some cases pursuant to a state statute so providing. Obeying Egelhoff, these courts preempted the state divorce revocation law at the plan level, thereby permitting the ex-spouse to receive the designated benefit from the plan, but allowing the person(s) entitled under the divorce revocation statute to recover those proceeds from the ex-spouse in a subsequent state-court action based on unjust enrichment. In a 2013 decision,Hillman v. Maretta, involving an insurance policy purchased under a program for federal employees, the Supreme Court extended preemption to forbid such post-distribution relief.

A surprisingly large number of people fail to update their estate plans after getting divorced.  Fortunately, a number of laws update your estate plan for you automatically upon divorce.  Depending on the type of asset, the law will provide a set of rules.  Here are the rules for Florida.

Last Will and Testament

For more than five decades, Florida law has provided that any provision of a will in favor of a divorced spouse is treated as if the surviving former spouse is already dead.  Florida statute Section 732.507(2) provides as follows.

Any provision of a will executed by a married person that affects the spouse of that person shall become void upon the divorce of that person or upon the dissolution or annulment of the marriage. After the dissolution, divorce, or annulment, the will shall be administered and construed as if the former spouse had died at the time of the dissolution, divorce, or annulment of the marriage, unless the will or the dissolution or divorce judgment expressly provides otherwise.

The exceptions to the rule – unless the will or divorce judgment provides otherwise – play a large role in probate in Florida.  We see a significant number of wills and estate plans provide for an ex spouse.

The source of a significant amount of probate litigation is the latter exception – that the deceased spouse was required to provide for the divorced spouse, whether through a marital agreement or divorce judgment.  In order for a divorce agreement to leave a bequest in a will be enforceable, the agreement must follow testamentary formalities, and the surviving spouse might have to file a creditor claim against the estate.

Revocable Trust

Given that a revocable trust is often used as a substitute for a will, one would think that the rules governing wills and trusts would be the same.  Not until 1989 was the rule for divorce for trusts made the same as that for wills.  Section 736.1105, which is part of the Florida Trude Code, sets forth as follows.

Dissolution of marriage; effect on revocable trust.—Unless the trust instrument or the judgment for dissolution of marriage or divorce expressly provides otherwise, if a revocable trust is executed by a husband or wife as settlor prior to annulment of the marriage or entry of a judgment for dissolution of marriage or divorce of the settlor from the settlor’s spouse, any provision of the trust that affects the settlor’s spouse will become void upon annulment of the marriage or entry of the judgment of dissolution of marriage or divorce and any such trust shall be administered and construed as if the settlor’s spouse had died on the date of the annulment or on entry of the judgment for dissolution of marriage or divorce.

Beneficiary, Pay on Death, Transfer on Death Accounts

Most life insurance policies have a beneficiary designation, setting forth who receives the death benefit.  Likewise, most financial institutions will permit the account owner to provide a pay on death or transfer of death designation in the even of death, so that the account can avoid probate.  Until 2012, the rule for nonprobate assets was that the beneficiary designation or pay on death designation controlled who received the account, even if there as a divorce.  In the seminal Florida Supreme Court case Cooper v. Muccitelli, 682 So. 2d 77 (Fla. 1996), the Court held that the account titling controlled who received the life insurance death benefit.

We conclude that the plain language of the above documents controls. To the extent that Karin may have claimed a right to remain primary beneficiary under the Academy policy as a condition of the dissolution of marriage, she waived any such claim when she signed the above agreement. The agreement clearly states: “Each party hereby waives . . . all claims . . . which he or she . . . might have . . . against the other.” Thomas was free to designate whomever he wished as beneficiary. To determine whom Thomas intended as beneficiary, we need look no further than the plain language of the policy itself: The primary beneficiary is Karin Pasquino. After signing the separation agreement, Thomas did just what he needed to do to ensure that the proceeds would go to Karin–he did nothing.

Whether one agrees with the logic and reasoning of the Court, such result was clearly at odds with how Florida was then treating wills and revocable trusts.  Modern estate plans make extensive use of these accounts, so this problem needed to be fixed.   Accordingly, the Florida legislature eventually adopted a statute to reverse this Supreme Court case.

Section 732.703, entitled “Effect of divorce, dissolution, or invalidity of marriage on disposition of certain assets at death,” provides that former spouses interest in the following types of accounts will be nullified on divorce automatically:

  • life insurance
  • qualified annuity, or other similar tax-deferred contract held within an employee benefit plan
  • employee benefit plan.
  • individual retirement account described in s. 408 or s. 408A of the Internal Revenue Code of 1986
  • payable-on-death account.
  • security or other account registered in a transfer-on-death form.
  • life insurance policy, annuity, or other similar contract that is not held within an employee benefit plan or a tax-qualified retirement account.

These rules do not apply if the divorce decree or marital agreement provides otherwise.  Also, if the account is governed by ERISA, which is a Federal employee benefit statute, Florida law does not apply.

Find Your Probate Star

Lawyer Locator Front End

Miami

Niuris Bezanilla

Broward County (Ft. Lauderdale)

Natasha M. Dalton

Pinellas County (Clearwater)

Matthew Weidner

Orange County (Orlando)

Philip W. Gunthert

Sarasota County

Dawn Bates-Buchanan

Hillsborough County (Tampa)

R. Todd Burbine

Marion County (Ocala)

Katina Pantazis

Palm Beach County

Nicole Quattrocchi

St. Lucie County

Romaine Brown

Collier County (Naples)

Gregory J. Nussbickel

Pasco County (Port Richey)

Matthew Weidner

Volusia County (Daytona)

Heather Caeners

Martin County (Stuart)

Jon L. Martin

Seminole County (Sanford)

Matthew Weidner

Duval County (Jacksonville)

Long H. Duong

Sumter County (The Villages)

Matthew Weidner

Lee County (Ft. Myers)

Scott Kuhn

Manatee County

Brice Zoecklein

Osceola County (South Orlando)

Matthew Weidner

Monroe County (Key West)

Matthew Weidner

Lake County (West Orlando)

Matthew Weidner

Charlotte County

Matthew Weidner

Complete Guide to Florida Probate

Opening the Probate Estate / Initial Steps
Payment of Creditors, Expenses And Beneficiaries
Florida Spousal and Family Rights
Closing the Probate Estate
Probate Litigation and Will Contests
Florida Probate Quick Guides

Complete Guide to Florida Probate

Opening the Probate Estate - Initial Steps
Payment of Creditors, Expenses And Beneficiaries
Florida Spousal and Family Rights

Find Your Florida Probate Star

Broward County (Ft. Lauderdale)

Natasha M. Dalton

Pasco County (Port Richey)

Matthew Weidner

Sarasota County

Dawn Bates-Buchanan

Palm Beach County

Nicole Quattrocchi

Duval County (Jacksonville)

Long H. Duong

St. Lucie County

Romaine Brown

Orange County (Orlando)

Philip W. Gunthert

Marion County (Ocala)

Katina Pantazis

Pinellas County (Clearwater)

Matthew Weidner

Collier County (Naples)

Gregory J. Nussbickel

Miami

Niuris Bezanilla

Hillsborough County (Tampa)

R. Todd Burbine

Volusia County (Daytona)

Heather Caeners

Martin County (Stuart)

Jon L. Martin

Lee County (Ft. Myers)

Scott Kuhn

Sumter County (The Villages)

Matthew Weidner

Manatee County

Brice Zoecklein