Watch Our Estate Planning Masterclass

WELCOME TO HOLLAND LAW OFFICES, LLC.

Large Firm Experience, Small Firm Responsiveness

Documents You’ll Need to Update after Divorce
Please Share!
Facebook
Twitter
LinkedIn
Email

Documents You’ll Need to Update after Divorce

Amidst all the turmoil, it is vital for people to understand the significance of updating beneficiaries on various accounts and financial instruments.

Documents You’ll Need to Update after Divorce:  Divorce is a challenging and emotionally draining experience. Even when the divorce process is over, there’s still more to be done. Failing to update beneficiaries after a divorce can have serious consequences, as reported in The National Law Review article “The Crucial Importance of Updating Documents After Divorce.”

A recent case, In the Matter of the Estate of Michael C. Jones, illustrates what can go wrong. The couple divorced in 2018, and their settlement required Michael to pay Jeanine $200,000 with a provision that any outstanding payments would become a debt owed by his estate in the event of his death. They maintained an amicable relationship. However, in 2019, Michael became seriously sick, underwent emergency surgery, and died just days after the surgery.

Before passing, Michael executed a banking Power of Attorney, appointing Jeanine as his POA while in palliative care. She organized his funeral, paid his bills and took care of their former marital home. At the time of his death, Michael had paid Jeanine about $100,000 as per the terms of their divorce settlement.

While caring for his home, Jeanine discovered several US series EE bonds that designated her as the pay-on-death beneficiary. She cashed them in and received more than $77,000.

After his death, Michael’s daughter from a prior relationship applied to the court to be appointed as administrator of the estate. She took the position that since Jeanine had received $77,000 from the bonds, the estate only owed her $23,000 as per the terms of the divorce settlement. Jeannine objected, asserting the bonds were not included in the money owed her in accordance with the divorce.

Federal law governs the beneficiary designation on treasury bonds, argued Jeanine. In this case, federal law supersedes state law. The trial court disagreed and included the $77,000 as part of the $200,000 owed to Jeanine. The case went to the Appellate Division, which found for Jeanine, stating that federal law takes precedence over state law, and she was entitled to both amounts.

There are a few takeaways from this case. First, anyone undergoing a divorce should check how their state laws treat divorce’s impact on beneficiary nominations on financial instruments and jointly held property. Second, change beneficiary designations on every document and financial instrument—going through old file folders and investment records to search for anything important. Third, if your wish is for your ex-spouse to remain as a beneficiary, include this in the settlement documents. Fourth, speak with your estate planning attorney about your divorce so any necessary changes can be made to your estate plan promptly, including wills, trusts and any documents used for incapacity.

Documents You’ll Need to Update after Divorce:  Divorce, like estate planning, requires attention to detail to ensure that your wishes are followed.

Reference: The National Law Review (Jan. 20, 2024) “The Crucial Importance of Updating Documents After Divorce”