The Effect of Divorce on Your Estate Plan
January 16th, 2021
The Effect of Divorce on Your Estate Plan
By: Austin E. Williamson and Heather Rooney McBride
Going through a divorce can be, and typically is, one of the most frustrating and emotional times in a person’s life. It is unsurprising that between court appearances, preparing for trial, and/or drafting motions, parenting plans, marital settlement agreements, and other necessary documents, a person may overlook what happens to his or her estate plan after the divorce. However, failing to adequately address an estate plan after a divorce can have significant effects on the manner in which your property will be distributed at your death and even to whom the property will be distributed. There are many types of estate plans and just as many ways that a divorce could affect those plans. The law provides some safeguards, but, unfortunately, depending solely on those safeguards presents its own peril.
Many estate plans consist only of a Last Will and Testament (hereinafter “Will”). In addressing a Will after a divorce, Revised Missouri Statute Section 474.420 provides that “[i]f after making a will the testator is divorced, all provisions in the will in favor of the testator’s spouse so divorced are thereby revoked but the effect of the revocation shall be the same as if the divorced spouse had died at the time of the divorce.” Mo. Ann. Stat. § 474.420 (West). Simply put, after a divorce, Missouri law will treat your now ex-spouse as if he or she had died before you. While on its face, this statute seems to solve the problem of property going to an ex-spouse, the law can only do so much, and property may now possibly pass to otherwise unintended recipients. Also concerning is that original designations in your Will made while you were married – from a selection of guardian for minor children to where you want to be buried – may now be undesired, ineffective, or silent.
More complicated estate plans may include a revocable and/or irrevocable trust. Due to the complex nature of Missouri’s trust code and how trusts may naturally affect ownership interests and rights to property, the simple take away is that trusts are not included in Section 474.420 discussed above. In other words, failing to amend or terminate an existing trust or to retitle property previously titled in a trust may allow an ex-spouse access and/or inheritance rights to your property.
In a consideration of non-probate transfers (e.g. payable on death, transferable on death, etc.), Missouri law adds some protection. Specifically, Revised Missouri Statute Section 461.051 provides, in part, that “[i]f, after an owner makes a beneficiary designation, the owner’s marriage is dissolved or annulled, any provision of the beneficiary designation in favor of the owner’s former spouse or a relative of the owner’s former spouse is revoked on the date the marriage is dissolved or annulled, whether or not the beneficiary designation refers to marital status. The beneficiary designation shall be given effect as if the former spouse or relative of the former spouse had disclaimed the revoked provision.” Mo. Ann. Stat. § 461.051.
Thus, as an example, if your vehicle had a transfer on death designation to your ex-spouse, the law would treat the ex-spouse as having disclaimed or waived his or her right to the vehicle at your death. Again, while providing protection, the vehicles, accounts, and other assets that at one time enjoyed a beneficiary designation now have no beneficiary and will consequently likely have to go through probate, ultimately being transferred to heirs at law.
It is also important to understand that Section 461.051 is likely not applicable to life insurance proceeds. Many states have “revocation-on-divorce” statutes that add similar protections for life insurance as those described above in relation to Wills and other non-probate transfers; however, Missouri is not currently one of those states, which means that if you fail to change your life insurance beneficiary after your divorce from your ex-spouse, it is possible that he or she could inherit the proceeds upon your death, requiring your rightful heirs to initiate litigation in order to claim what would or should have been their inheritance.
Similarly, titling property in both parties’ names is a common way to avoid probate; however, failing to address jointly held property after a divorce may have serious consequences. Specifically, divorce decrees are generally required to designate and award separate and marital property; however, should a person fail to retitle joint property, then that property, by law, will immediately pass to the surviving owner (your now ex-spouse) at your death.
Additionally, most estate plans will include medical and/or financial powers of attorney that will designate an attorney in fact to make important, sometime life-altering, decisions for you should you become incapacitated. In similar fashion as above, the law provides some safeguards in the event of a divorce; specifically, Missouri Revised Statute Section 404.717 provides, in part, that “…the authority granted in a power of attorney shall be modified or terminated…[o]n the filing of any action for divorce or dissolution of the marriage of the principal and the principal’s attorney in fact who were married to each other at or subsequent to the time the power of attorney was created, unless the power of attorney provides otherwise.” Mo. Ann. Stat. § 404.717. Thus, while your ex-spouse or soon-to-be-ex-spouse may not have the right to “pull the plug” on you, Section 404.717 may leave you without a designated agent to make decisions for you and/or represent your wishes should you become unable to do so.
Death may be the only topic that is more depressing to contemplate than divorce; however, neglecting to consider the consequences of a divorce on your estate plan could have irreparable effects. If you would like to speak with an attorney about creating or modifying your estate plan or to discuss how your divorce may have affected your existing estate plan, please contact Rooney McBride & Smith, LLC at 417-708-9681 to schedule a free consultation.