Charles N. Doberneck

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Effect Of Divorce On Rights Of Divorced Spouse Upon Death Of Former Spouse

Posted on May 18, 2014 at 12:40 AM

Under Indiana law, divorce (or annulment of a marriage) has the effect of revoking all provisions in a will in favor of the divorced spouse.  Divorce or annulment has the same effect for dispositions of property under a revocable living trust in favor of the divorced spouse, by treating the divorced spouse as having died before the spouse who created the revocable trust.  However, a mere legal separation does not affect the rights of a spouse under a will or a trust.  In addition,  divorce does not affect the rights of a spouse under a trust that is irrevocable (most commonly an irrevocable life insurance trust) on the date of a divorce or annulment.  Although in some states divorce will terminate a spouse’s right as a designated beneficiary in a policy on the other spouse’s life, unless the owner of the policy owner executes and files a change in beneficiary designation with the insurance company, a divorced spouse is not barred from receiving insurance proceeds under a policy on the life of the former spouse.  This happens from time to time due to a divorced spouse’s overlooking beneficiary designations on life insurance policies.  It is important to understand that a will or a trust has no effect on beneficiary designations under insurance policies, bank accounts, brokerage accounts, retirement accounts, or any other property by which the owner may designate a beneficiary by contract.  Therefore, in the event of a divorce it is crucial to review and change all beneficiary designations for every type of property owned by a divorced spouse, rather than simply relying on the belief that either the divorce decree or various laws will automatically terminate the rights of the former spouse to claim and receive property or benefits under beneficiary designations that name the former spouse.  More generally, a person should periodically review all beneficiary designations regardless of marital status to make sure that they reflect the owner’s current wishes.

Categories: Estate Planning