Estate Planning and Former Spouses: Updating your Will, Life Insurance and Other Beneficiary Designations following a Divorce

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Following a divorce, you should carefully review your estate plan to ensure that your former spouse will not receive any unintended distributions from your estate.  Unless otherwise required by the terms of the divorce, you should revise your Will to remove your ex-spouse as a beneficiary.  You also should update beneficiary designations for any non-probate assets in which you hold an interest, such as life insurance policies, retirement plans and joint bank accounts.

Even if you neglect to revise your estate plan, New Jersey law provides some protection by presuming that a divorce generally revokes a former spouse’s designation as a beneficiary under any “governing instrument.” N.J.S.A. 3B:3-14.  The term “governing instrument” is defined broadly to include a variety of items, such as deeds, Wills, trusts, insurance policies, retirement and bank accounts and powers of attorney. N.J.S.A. 3B:1-1.

However, N.J.S.A. 3B:3-14 does not apply in all situations. Courts have concluded that the statute cannot trump beneficiary designations governed by the Employee Retirement Insurance and Security Act (“ERISA”).  See Juno v. Verizon Communications, Inc., 2011 WL 1321683 (D.N.J. Mar. 31, 2011) (holding N.J.S.A. 3B:3-14 did not apply to 401(k) ERISA plan); In re Kensinger, 2010 U.S. Dist. Lexis 116078 (D.N.J. Nov. 1, 2010) (same).  Nor can it disturb beneficiary designations made pursuant to the Servicemembers’ Group Life Insurance Act. See Calmon-Hess v. Harmer, 904 F. Supp. 2d 388 (D.N.J. 2012).  Moreover, the Supreme Court of the United States recently held that a similar Virginia statute could not alter a beneficiary designation controlled by the Federal Employees’ Group Life Insurance Act.  See Hillman v. Maretta, 133 S. Ct. 1943 (2013).

Accordingly, the best method to prevent confusion, unnecessary disputes and the unwanted disposition of your assets to a former spouse is to update your estate plan promptly after a divorce.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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