Changes in family and marital status are major events in anyone’s life. They also have far-reaching effects on financial and property interests by causing automatic changes to wills and estate plans, well beyond the obvious personal and emotional consequences. Here are a few points to keep in mind regarding changes to wills and beneficiary designations:
- If you get married, your new spouse will automatically become a beneficiary of your estate. Even if your Will makes it clear that you have intentionally excluded your prospective spouse or limited his or her share of your estate, your surviving spouse may be able to make a “spousal election” after you die, upsetting the plan in your Will. A surviving spouse who makes a “spousal election” under Pennsylvania law receives a 1/3 share of your estate, regardless of what your Will provides. To prevent your spouse from electing his or her “spousal share” after your death, you must have a valid and enforceable marital property agreement. Such agreements are a complex topic beyond the scope of this article and require experienced legal assistance.
- Under most employer-sponsored retirement plans (401K, pension and profit-sharing), if an employee dies, his or her surviving spouse automatically receives all death benefits. If you want a child or other person to receive death benefits from your employer-paid plan, you must sign a new beneficiary designation form after your marriage and get your spouse to sign a waiver and consent form. Check with your plan administrator or human resources department for the correct forms and procedures.
- Divorce can cause similarly dramatic changes to wills and estate plans. Pennsylvania law provides that any provision in your Will favoring your spouse becomes ineffective for all purposes upon divorce, unless it appears from the Will that the provision was intended to survive the divorce. Similarly, divorce automatically revokes any pre-divorce beneficiary designation of a spouse on a life insurance policy, annuity contract, pension or profit-sharing plan, or other contractual arrangement. This automatic revocation applies only if the designation could have been revoked after divorce, but for some reason (usually just procrastination or oversight) was not revoked. If the wording of the beneficiary designation, a written property settlement agreement, or a court order shows that the ex-spouse was intended to remain as beneficiary after the divorce, of course the automatic revocation does not apply. Importantly, however, if the plan is an ERISA governed plan, any pre-divorce beneficiary designation of an ex-spouse remains effective unless you update your designations. Therefore, if your plan is ERISA governed, as many plans are, it is imperative that your beneficiary designations are updated immediately upon divorce.
If you have recently married or divorced, or if such event is in your future, a legal review of your Will, beneficiary designations, and property rights is essential. Your Stock and Leader attorney can help you work through the complex tax, property, and marital laws to protect your intended beneficiaries and give you peace of mind that your true intentions will be carried out. When Decisions Matter, contact our experienced Estate Planning Attorneys.