Terminating Beneficiary Designations Upon Divorce
While life insurance policies help provide financial security to a policyholder’s loved ones upon his or her death, they can also cause confusion when a couple decides to divorce. For instance, many people choose to list close relatives like spouses as their beneficiaries on these policies. Although this can be advantageous during marriage, it can result in complications if the parties forget to remove those designations upon divorce. Fortunately, Florida lawmakers have simplified some of these issues by making the automatic revocation of a former spouse’s beneficiary status the default rule in the state. To learn more about changing beneficiary designations upon divorce, please contact our experienced property division legal team for assistance.
Florida’s Default Rule
In Florida, if a person designates a spouse to receive a payment or the transfer of an interest in an asset upon his or her death and that couple later decides to end their marriage, the former spouse’s designation will automatically be voided upon dissolution of the union. Essentially, the beneficiary status of a former spouse terminates automatically when a court officially dissolves a marriage. It is important to note, however, that this revocation-on-divorce law does not apply if a spouse passes away during divorce proceedings and before the court issues a final decree. In these cases, the other spouse’s designation as a beneficiary will remain valid.
Example of Florida’s Revocation-on-Divorce Law
We’ve included a brief example to illustrate the importance of Florida’s revocation-on-divorce law. Take for example, a life insurance policy that insures the policyholder’s life and names that person’s spouse as the beneficiary of the policy. In prior decades, if the couple later got divorced and the policyholder was awarded ownership of the policy, but forgot to remove his or her former spouse as a beneficiary, that individual would collect those assets upon the policyholder’s death. Revocation-on-divorce laws help prevent these types of situations by automatically voiding the designation of a former spouse on a policy upon the finalization of the couple’s divorce.
Assets to Which Automatic Termination of Spousal Designation Applies
Under Florida law, a former spouse’s designation as the beneficiary of a policy will automatically be terminated upon divorce, but only if the policy or asset falls under one of the following categories:
- A life insurance policy, qualified annuity, or a tax-deferred contract included in an employee benefit plan;
- An individual retirement account, including individual retirement annuities;
- A payable-on-death account;
- An employee benefit plan;
- A life insurance policy that isn’t included in an employee plan or tax-qualified retirement account; or
- A security or other account that is registered on a transfer-on-death form.
There are also a few exceptions to Florida’s automatic termination rule. A beneficiary designation will not be subject to automatic termination, for instance, if a competing law or instrument (such as a will, trust, retirement plan, or court order) expressly recognizes a former spouse’s right to receive a benefit.
Call Today with Your Divorce-Related Questions and Concerns
Call Sandra Bonfiglio, P.A. to consult with a Fort Lauderdale property division attorney about your case. You can reach us at our office by calling 954-945-7591 or by completing one of our online contact forms.