Posted by: Woodfork Law | March 4, 2013

Estate Planning Action and Inaction

Divorce can have a tremendous adverse impact on the best estate plans.  First the good, if a husband and a wife have a will or a trust, in the event of a divorce, all inheritance given to the former spouse is revoked. This means you does not have to do anything to make sure the former spouse doesn’t get anything in your will after a divorce.

Now the bad, much different from the will or trust, if a husband and wife have a POD, TOD, or life insurance policy, you must notify the bank or insurance company of the divorce.  Thus, if your marriage ends in divorce, you must affirmatively inform the institution in writing.

Most people have a POD or “payable on death” provision for their bank account.  This means that when a person passes, their bank account goes to the beneficiary (usually spouse) outside the probate process.  A TOD or “transfer on death” is essentially the same thing, but for securities accounts (stocks, bonds, etc).

The risk here is obvious. Example, when you opened your checking account, savings account, brokerage account, or purchased life insurance, you named your spouse as the beneficiary in the event you passed before your spouse.  Years later, you divorce.  If you do not notify the bank, brokerage firm, or insurance company of your divorce, and you pass before your former spouse, your former spouse will get those accounts. Unless you have an agreement with your ex-spouse, this is clearly not what you wanted.


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