How Does Divorce Impact Estate Planning?
Divorce is an unfortunate reality. According to the American Psychological Association, about 40% to 50% of married couples in the United States divorce, and the divorce rate for subsequent marriages is even higher. With this in mind, divorce is often an import part of estate planning.
Prenuptial and Postnuptial Agreements
The first question in considering how a divorce could affect a couple’s estate plan is whether the couple created a prenuptial or a postnuptial agreement.
These agreements are used to settle numerous types of issues in the event of death or divorce, such as the division of the couple’s separate property, joint property, and debts. A ‘prenuptial’ agreement is signed before the couple is married, while a ‘postnuptial’ agreement is signed after the couple is married. Note that a couple can always choose to modify their agreement, so long as they are in agreement about the change, and they may even terminate the agreement if they no longer want it.
If the couple has a prenuptial agreement or a postnuptial agreement, the estate plan must be consistent with the agreement. The estate plan may go beyond what is required in the agreement, but the estate plan will not be enforceable to the extent that it conflicts with the agreement.
For example, suppose Husband and Wife have a prenuptial agreement that says Wife will receive the couple’s home if Husband predeceases Wife. In this case, Husband’s estate planning documents may say that Wife receives their home plus other assets. This would be valid and enforceable. On the other hand, if Husband’s estate plan says that the couple’s children would receive their home instead of Wife receiving the home, this gift to the children would conflict with the terms of the prenuptial agreement and, therefore, would not be valid and enforceable.
If an individual creates a Will or other document that conflicts with the terms of a valid prenuptial agreement or postnuptial agreement, a court may set aside the inconsistent terms in the Will. In the above example, Wife could seek a court order awarding her the couple’s home in accordance with their prenuptial agreement, notwithstanding the terms of Husband’s Will.
Florida Law and Divorce
The second consideration in addressing divorce issues is how Florida law affects estate planning. In fact, Florida law does address these issues, but the law allows individuals to change the result that would otherwise be required by the law.
As an aside, sometimes the law dictates how things must be done, such as the legal requirements that must be followed when a Will is signed. Other times, however, the law provides ‘gap filler’ rules, which answer questions but allow individuals to make changes. An example of the latter is the Florida intestacy laws, which determine who will receive the estate of an individual who dies without a Will. The individual can avoid the effect of the intestacy laws by creating a valid Will.
In the context of divorce, one ‘gap filler’ statute is Section 732.507(2), Florida Statutes. This statute says that, upon a couple’s divorce, the former husband and the former spouse will each be deemed to have predeceased the other at the time of their divorce for purposes of administering their Wills.
As an example, suppose John and Mary create Wills that leave their estates to each other. Later, they are divorced. Under the statute, John and Mary would be deemed to have predeceased each other at the time of the divorce for purposes of their estates. If John later died, Mary would not inherit anything from John’s estate under the statute.
While this result is likely consistent with what most people would want, it is nonetheless possible to change the result under the statute. For example, a husband could provide in his Will that his wife will inherit his estate even if they are subsequently divorced. The couple could also determine in their divorce agreement for certain gifts to be included in their estate plans.
Having considered the application of any prenuptial or postnuptial agreements, as well as Florida law, the couple should consider whether they want to address the possibility of divorce in their estate plan.
In my experience, most clients choose simply to affirm the effect of the statute discussed above. That is, clients typically create Wills (and other documents) that provide that, in the event of a divorce, each spouse will be deemed to have predeceased the other. This effectively results in mutual disinheritance in the event of divorce.
Then again, some clients desire estate planning documents that specifically provide for their spouse to receive real property and other gifts even if divorce should occur. Florida law permits these types of gifts. Of course, these gifts are generally revocable unless steps are taken to make the gifts irrevocable.
These concerns and other related concerns may all be addressed through proper estate planning. There are related questions that this blog has not addressed, such as how a Will is impacted by a later marriage, how beneficiary designations are impacted by divorce, etc. As always, there are also other details that a general blog cannot address.
It is worth taking the time to create documents to settle all of these issues in the way you would prefer (and avoid possible consequences from legal or other presumptions).