I have handled more than one case where someone died and a former spouse unintentionally received life insurance proceeds as a result. Some times the former spouses hated each other and the pay out was many years after the divorce. If the potential client was a family member, I usually could not do much for them. If I was defending the former spouse against the family or subseqent spouse, then I was likely to succeed. It is a fairly frequent occurrence for a former spouse, more often than not the husband, to forget to change the beneficiary of his life insurance policies. Thus, many years later the ex-spouse (usually the wife) would get a delightful surprise of several thousands of dollars much to the chagrin of the second wife in many cases. The same could and did happen with joint accounts, payable on death designations, and named beneficiaries for annuities, IRAs, 401(k)s, and other financial accounts.
With more than a trillion dollars changing hands as the oldest baby boomers pass away, the Florida Legislature has passed a new statute to address this problem. Florida Statute section 732.703 took effect as of July 1, 2012. It provides in part as follows:
A designation made by or on behalf of the decedent providing for the payment or transfer at death of an interest in an asset to or for the benefit of the decedent’s former spouse is void as of the time the decedent’s marriage was judicially dissolved or declared invalid by court order prior to the decedent’s death, if the designation was made prior to the dissolution or court order. The decedent’s interest in the asset shall pass as if the decedent’s former spouse predeceased the decedent. An individual retirement account described in s. 408 or s. 408A of the Internal Revenue Code of 1986, or an employee benefit plan, may not be treated as a trust for purposes of this section.
In other words, once the marriage is dissolved (i.e., the parties are divorced) or declared invalid, any asset transfer or payment that is effective at death is a nullity as to those assets listed in the statute. This statute is not, however, an excuse to be lazy or incautious. A failure to change beneficiaries could still result in a payment to the former spouse. The current spouse or beneficiaries would then have to sue the former spouse to recover the money and the insurer or other payor can not be sued. So a failure to take care of the details could still be trouble for the family.