How does divorce affect your designations of an ex-spouse as beneficiary of assets when you die? Multiple assets covered under Florida’s automatic revocation statute, Section 732.703, pass as if your surviving ex-spouse died first.
How it Plays Out: Life Insurance Beneficiary Designations
A former wife named as primary beneficiary on her former husband’s life insurance policy claims benefits under the policy. Following their divorce, he never changed his beneficiary designation.
Relying on Section 732.703, Florida Statutes, the life insurance company may review the insured’s marital status on the death certificate and pay out the proceeds. The company may make these payment decisions and avoid the delay and expense of an interpleader action.
First Example: Single, Divorced, or Married to Someone Else
The death certificate states the decedent was unmarried at death. It lists the marital status as “Single” or “Divorced” or “Married” (to someone other than the former spouse). Unless a statutory exceptions applies, Section 732.703(5) authorizes a payor to pay the secondary beneficiary.
Second Example: Insured Decedent Was Married to the Named Beneficiary
The death certificate states the decedent was married to the spouse named as the primary beneficiary. The payor/insurer won’t be liable for paying on account of, or transferring an interest in, the asset to the primary beneficiary.
Third Example: Designation Form Doesn’t State the Relationship With the Beneficiary
Now suppose the governing instrument names a beneficiary, but doesn’t specify the relationship between the decedent and named beneficiary. Or, the instrument explicitly provides the beneficiary is not the decedent’s spouse. The payor/insurer won’t be liable for paying on account of, or transferring an interest in, the asset to the named beneficiary.
Fourth Example: Silence About Marital Status
What if the death certificate is silent about the decedent’s marital status at the time of death? The payor is not liable for paying on account of, or for transferring an interest in, that portion of the asset to the primary beneficiary. The primary beneficiary must deliver to the payor an affidavit in substantially in the form set forth in Section 732.703(5)(b), Florida Statutes.
The Law Before Section 732.703
Florida law voided a provision of a will that affected a decedent’s spouse upon the dissolution or annulment of the marriage. If the person died without changing the will following divorce or annulment, the will was executed as though the former spouse predeceased the decedent.
But the same wasn’t true for non-probate or non-trust assets, such as a life insurance policy. Before section 732.703 was enacted, courts examined whether marital settlement agreements specifically provided who would or would not receive death benefits or would be the beneficiary of life insurance. General language in agreements was insufficient to override plain language of beneficiary designations. See Crawford v. Barker, 64 So.3d 1246, 1248 (Fla. 2011); Cooper v. Muccitelli, 682 So.2d 77 (Fla. 1996); Luscz v. Lavoie, 787 So.2d 245, 250(Fla. 2d DCA 2001); Smith v. Smith, 919 So.2d 525 (Fla. 5th DCA 2005).
Applicability of Section 732.703(2), Florida Statutes
Section 732.703(2), Florida Statutes provides:
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.
The amended statute applies to decedents who die after July 1, 2012, regardless of when they made a beneficiary designation.
The statute applies to the following assets in which a Florida resident has an interest at death:
- A life insurance policy, qualified annuity, or other similar tax-deferred contract held within an employee benefit plan.
- An employee benefit plan.
- An individual retirement account, including an individual retirement annuity described in section 408(b) of the Internal Revenue Code of 1986.
- A payable-on-death account.
- A security or other account registered in a transfer-on-death form.
- A life insurance policy, annuity, or other similar contract that is not held within an employee benefit plan or a tax-qualified retirement account.
Exceptions to Automatic Revocation
There are exceptions under the statute to automatic revocation of beneficiary designations of your ex-spouse.
Exception 1: Controlling Federal Law Provides Otherwise
Federal law preempted state automatic revocation statute
Federal law may preempt automatic revocation. For example, in Hillman v. Maretta, 133 S. Ct. 1943 (2013), the U.S. Supreme Court held federal law, the Federal Employees’ Group Life Insurance Act of 1954 (FEGLIA), preempted a Virginia statute similar to Florida’s automatically revoking a beneficiary designation on a federal employees’ life insurance policy. The decedent, a federal employee, remarried. But he never changed the designation of his ex-wife as beneficiary. His widow lost her lawsuit seeking to direct the payment of the death benefit to his estate, of which she was beneficiary, rather than to his former wife.
Citing Hillman, a Florida state court held, if the Servicemembers’ Group Life Insurance Act (SGLIA) protected a beneficiary designation under a life insurance policy qualified under the SGLIA, federal law would preempt the state court’s order, which directed a former husband to change the beneficiary designation of his life insurance policy. Hirsch v. Hirsch, 136 So. 3d 622, 623-34 (Fla. 2d DCA 2013).
2021 Preemption Case (ERISA)
Preemption came up in Ragan v. Ragan, 2021 COA 75, Case No. 20CA0038 (Colorado Court of Appeals May 27, 2021). Deciding a matter of first impression, the Colorado Court of Appeals held the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 to 1461, preempts post-distribution lawsuits against an ex-spouse under Colorado’s divorce-revocation statute, section 15-11-804, C.R.S. 2020. As in Florida, Colorado law automatically revokes upon divorce any beneficiary designation of a former spouse. To avoid this result, the named ex-spouse must expressly waive rights to the ERISA plan proceeds.
No Federal Preemption of Post-Distribution Claims When Ex-Spouse Expressly Waives Rights
On the other hand, when a spouse expressly waives rights to death benefits on an ex-spouse’s death, federal law hasn’t preempted state law claims by the ex-spouse’s estate or secondary beneficiaries. That’s what the Florida Third District Court of Appeal found happened in Martinez-Olson v. Estate of Olson, Case No. 3D20-1301 (Fla. 3d DCA September 1, 2021).
In a marital settlement agreement, Mrs. Martinez-Olson specifically waived any entitlement to her TV producer decedent ex-husband’s 401(k). After they divorced, she still appeared as named primary beneficiary on the 401(k). His employer, Sunbeam Television Corporation distributed the ERISA-governed 401(k) proceeds to her.
ERISA requires every employee benefit plan be established and maintained pursuant to a written instrument specifying how payments are made to and from the plan. 29 USC 1102(a)(1), (b)(4). In Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285 (2009), the United States Supreme Court held 29 U.S.C. § 1104(a)(1)(D) requires an ERISA plan administrator to act “in accordance with the documents and instruments governing the plan . . . and ERISA provides no exemption from this duty when it comes time to pay benefits.”
The 3d DCA concluded Mr. Olson’s estate could pursue a post-distribution action against the ex-wife to enforce the marital settlement agreement and recover the proceeds. The settlement agreement was specific enough to override the beneficiary designation form. It specifically referred to and the ex-wife waived any interest in the disputed 401(k) plan and the “proceeds therefrom.”
Compare the Olson marital settlement agreement with Crawford v. Barker, 64 So. 3d 1246 (Fla. 2011), which generally stated:
“General language in a marital settlement agreement, such as language stating who is to receive ownership, is not specific enough to override the plain language of the beneficiary designation in the separate document. The spouse, who owns the policy, plan, or account following the dissolution of marriage, is otherwise free to name any individual as the beneficiary; however, if the spouse does not change the beneficiary, the beneficiary designation in the separate document controls.”
It’s unnecessary for divorcing parties to use magic words “death benefits” in expressing the waiver of interest in a specified 401(k) and its proceeds.
The Olson court answered yes to the question of first impression: Could the estate bring the state law claim against the ex-wife as the named beneficiary to enforce a contractual waiver after distribution of the ERISA-governed 401(k) proceeds?
In support of its ruling, the Third DCA cited the Eleventh Circuit decision in MetLife Life and Annuity Company of Connecticut v. Akpele, 886 F. 3d 998 (11th Cir. 2018), which held, while a party not a named beneficiary can’t sue the plan for plan benefits, because ERISA preempts such claims, the party can sue the plan beneficiary to recover benefits received.
Similarly, in Walsh v. Montes, 388 P. 3d 262 (NM Ct. App. November 14, 2016) the preemption doctrine did not bar claims between contestants to proceeds of a qualified Fidelity savings and investment plan under ERISA. As in Olson, the decedent designated her ex-husband on, but never updated, a beneficiary designation form. The plan administrator properly paid out the proceeds of the account in reliance on the form and by the plan’s written terms. The court found that the ex-husband had waived his rights in a marital settlement agreement to benefits in the ERISA plan, however. Thus, the court allowed his ex-wife’s estate and children to pursue recovery against him for the proceeds he received.
No Preemption to Recover Funds After the Plan Administrator Pays Them
As in the September 1, 2021 Olson case, discussed above, courts have found no preemption to enforcing express waivers in marital settlement agreements. That means estates may recover funds administrators already paid out to an ex-spouse who waived entitlement to them.
For example, in In re: Estate of Easterday, 171 A. 3d 911 (Pa. Super. 2017), affirmed 209 A. 3d 331 (Pa. 2019) the Easterdays signed a marital settlement agreement waiving their rights to each other’s pension benefits. The decedent had a pension plan through his employer, Federal Express. The pension plan administrator paid benefits to the former Mrs. Easterday. The court held ERISA did not preempt the estate from enforcing the contract she signed, waiving entitlement to those pension benefits. To the contrary, the estate could recover benefits already.
See also Estate of Benyo v. Breidenbach, 233 A.3d 774, 781 (Pa. 2020) (a statute providing that municipal employee pension funds were payable only to the designated beneficiary and not subject to garnishment or alienation applied “only to pension funds that remain in the possession of the plan administrator,” and didn’t prevent a court from directing the disposition of the funds after they left the pension administrator).
Exception 2: After Dissolution, You Designate Your Ex-Spouse As Beneficiary of the Policy or Account
After divorce, as the policy or account owner, you may designate your former spouse as beneficiary. To do that, you sign a governing instrument providing the benefit will be payable to your ex.
When you divorce, you may contractually commit to continue beneficiary designations after divorce for your ex-spouse’s or children’s benefit. Indeed, in the Florida Supreme Court’s approved family law form marital settlement agreements, there is a section that guides divorcing couples through options to make or keep beneficiary designations. See In re Amendments to the Florida Supreme Court Approved Family Law Forms, 138 So. 3d 389 No. SC13-532 (May 1, 2014) and Florida Supreme Court Approved Family Law Form 12.902(f)(1), Marital Settlement Agreement for Dissolution of Marriage with Dependent or Minor Child(ren) (02/18).
Exception 3: Specific Post-Divorce Designations of Ex-Spouse to Receive Assets Under a Will or Trust
Assets Passing Under a Will
If a will or trust covers the asset, you may specifically designate your ex-spouse as beneficiary of the asset when you die. Effective July 1, 2021, section 732.507(2)(b), Florida Statutes permits a specific post-divorce designation of a former spouse in a will to designate an ex-spouse as irrevocable beneficiary of an asset. In 2021, the Florida Legislature amended section 732.507(2)(b), Florida Statutes. See changes at Laws of Florida, 2021-183.
Assets Passing Under a Revocable Trust
Similarly, to maintain a trust asset for your ex-spouse’s benefit, effective July 1, 2021, section 736.1105, Florida Statutes doesn’t void statements in your revocable trust that refer to and specifically override automatic revocation. Nor does the amended statute void provisions of a revocable trust you may sign after your divorce committing you to designate your ex-spouse as beneficiary.
Exception 4: Final Judgment of Dissolution or Marriage Provides for No Revocation of Ex-Spouse as Beneficiary
When a final judgment of dissolution requires you to make or keep children of your marriage or your former spouse an irrevocable beneficiary of an asset, automatic revocation doesn’t apply. A court may compel one spouse to maintain the asset for the benefit of a former spouse or children. Examples are death benefits earmarked to secure alimony or child support if you die before your support obligations end.
Exception 5: Inability Unilaterally to Change Beneficiary or Pay-On-Death Designation
No automatic revocation applies when you can’t unilaterally change the beneficiary or pay-on-death designation for an asset.
Exception 6: The Law Makes the Designation Irrevocable
When you can’t revoke a designation of your ex as beneficiary under applicable law, Florida’s automatic revocation statutes don’t apply.
Exception 7: Law of Another State Applies
The automatic revocation of designations under Section 732.703, Florida Statutes, doesn’t apply when laws of a state other than Florida govern the instrument.
Exception 8: Co-Ownership
Two or more persons own an asset. One owner’s death vests ownership in the surviving owner or owners. The automatic revocation upon divorce statute doesn’t change that result.
Exception 9: You Remarry Your Ex
You remarry your ex, whose interest would’ve been revoked. You’re still married to each another when you die. Automatic revocation under Section 732.703 doesn’t apply.
Exception 10: State-Administered Retirement Plans
The automatic revocation statute doesn’t apply to state-administered retirement plans under Chapter 121, Florida Statutes.
Questions to Determine If Section 732.703 Applies
- Did the insured die after July 1, 2012?
- Is the asset (e.g., benefit plan) within the scope of section 732.703?
- Is there a marital settlement agreement that addresses the asset?
- Does the marital settlement agreement require a former spouse to maintain the asset as security for alimony or child support?
- Is there a final judgment of dissolution that refers to the asset?
- Is there evidence of a testamentary instrument (e.g., last will and testament) naming a former spouse as beneficiary of the asset upon the owner’s death?
- Does the instrument governing disposition of the asset upon death specify the relationship of the beneficiary to the decedent, or provide the beneficiary is not the decedent’s spouse?
Questions to Determine If An Exception Applies
- Is the asset controlled by federal law, e.g., 401(k) plans and Keogh plans under the Retirement Equity Act (REA) of 1984; a plan under the Federal Employees’ Group Life Insurance Act of 1954 (FEGLIA); or a plan under the Servicemembers’ Group Life Insurance Act (SGLIA)?
- Is the asset a state-administered retirement plan, under the Florida Retirement System, which applies, for example, to pension plans for state and county officers and employees, law enforcement officers, firefighters, highway patrol workers, correctional officers, and public school teachers?
- Does the policy or application for insurance address dissolution or annulment?
- Does a will or trust instrument govern the disposition of the asset and, if so, does either section 732.507, Florida Statutes (e.g., a specific post-divorce designation of former spouse in will or obligation in a final judgment to make the former spouse an irrevocable beneficiary) or section 736.1105, Florida Statutes (specific post-divorce designation of former spouse in trust instrument or obligation in a final judgment of dissolution make the former spouse an irrevocable beneficiary?
- Following entry of the final judgment of dissolution or annulment, did the decedent sign a new designation expressly naming the former spouse as beneficiary?
- Does a final judgment or settlement agreement obligate the insured to keep the former spouse or minor children as irrevocable beneficiaries?
- Does the final judgment require the insured to maintain the policy for a former spouse’s benefit or for the benefit of any minor children?
- Under the terms of the final judgment, could the decedent unilaterally have terminated or modified ownership of the asset without anyone else’s prior knowledge and consent?
- Are other assets of the decedent available to fulfill such requirement for the benefit of the former spouse or minor children?
- Is the beneficiary designation irrevocable under applicable law?
- Is the contract or agreement governed by state law other than Florida?
- Does operation of law vest ownership of an asset in one or more surviving co-owners?
- Did the decedent remarry the former spouse and were they married to one another at the time of death?