If You Want a Happy Second Spouse, Change Your Beneficiaries After a Divorce

Glad your ex is out of your life?  Want to make sure your new spouse is taken care of after you die?  Pay attention to this article.

The Kentucky Court of Appeals issued a ruling earlier today that directly affects anyone who has gotten divorced and at the time had any kind of investment account, retirement account, life insurance policy or other similar contract that allows one to designate a beneficiary.  In the case of Sadler v. Buskirk, Richard & Barbara Buskirk were divorced and entered a property settlement agreement.  Under the terms of the agreement, they each waived any interest in the other's individual retirement accounts.  Nothing was mentioned about the beneficiary rights.  Richard later married Ruth Ann Sadler.  When Richard died, Ruth Ann discovered that Richard had never changed the beneficiary of his Dreyfus IRA to remove Barbara.  Ruth Ann filed suit asking the court to prevent Barbara from recovering.

Both the trial court and the Court of Appeals ruled that the marital settlement agreement only served to determine the ownership rights of the IRA.  The power to designate the beneficiary is inherent to the ownership rights and authority.  The settlement agreement was silent on beneficiary rights or any possible waiver of the right to claim as a beneficiary.  The Court of Appeals briefly discussed the possibility of a waiver of the beneficiary interests and stated that any such waiver would have to be very specific.  A general waiver of all other claims to the other party's property was not sufficient.

The moral of this story is that when you go through a major life changing event whether it is a divorce, a marriage, a birth or a death in your family, it is time to sit down with your attorney, your accountant, and your financial advisor to ensure that your beneficiary designations and the rest of your estate plan truly reflect your wishes.

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