The Simple Mistake That Could Leave Inheritance for an Ex, No Matter What Your Will Says

Divorce can complicate estate planning (among other things). The good news is that your ex is automatically cut out of your will in most states.

“Under New York law, once a divorce is finalized, your ex-spouse is generally treated as if they predeceased you for the purposes of your will,” said Karen Davakis, senior counsel at Falcon Rappaport & Berkman LLP. “This means that even if you forget to remove your ex-spouse from your will, any gifts or fiduciary appointments to your ex-spouse made under your will are automatically revoked by law.”

The bad news is that your will might not control every asset you own, and your ex must literally be your ex, not your pending ex. Marital separation typically won’t qualify for this protection.

Wills Have Limitations

A will valid in one state may not be upheld if you die while residing in another state. After divorce, most states will disinherit an ex-spouse, but some, like Florida, require a new will. If the will isn’t updated, a court may reassign assets in a process known as intestate succession. Someone might receive a share of your assets just because they’re related to you, even if they were never included in your will.

Perhaps the most significant limitation of a will is that it doesn’t address and distribute everything you own. This can result in your ex receiving an inheritance from you, even if that’s the last thing you intended.

Your Beneficiary Designations

“A will only controls assets that are held in your name that don’t have a designated beneficiary,” Davakis said. “It doesn’t control assets that pass outside of probate, such as assets with beneficiary designations.”

Some of your accounts and assets could be up for grabs if you don’t take an additional step, even if you clearly cut your ex out of your will. Beneficiary designations will override the terms of your will and control the assets in question.

Some common assets that bear beneficiary designations that will override the terms of your will include:

• 401(k)s
• Annuities
• Bank accounts with payable-on-death designations
• Individual retirement accounts (IRAs)
• Life insurance
• Pension benefits

You must change these designations when your divorce is final if you’ve named your ex and don’t want them to inherit.

“The asset will pass directly to the named beneficiary, regardless of what your will says,” Davakis said. “If you want to change who receives these assets, you must update the beneficiary designation with the financial institution or plan administrator.”

However, be sure to check your divorce decree first. It may include provisions that you must maintain your ex as a beneficiary in some situations.

“Confirm what your divorce orders say about what’s required of you,” said Meghan Freed, managing co-partner and divorce attorney at Freed Marcroft LLC. “The court may have required you to keep your ex as the beneficiary of a life insurance policy to secure child support or alimony in the event of your death.”

You Have Other Options

You don’t have to rely only on a will. Another option is setting up a living trust. Instead of naming a person as your beneficiary, you name the trust. That way, you don’t have to keep changing beneficiaries every time you have a life change.

When you die, your assets go into the trust and pass to the people you’ve chosen. Because those assets skip probate, they usually can’t be redirected to an ex-spouse.

A living trust can be revocable or irrevocable. Each comes with different levels of control and protection.

• Revocable trust: You act as a trustee, retain control over the assets, and can change beneficiaries and terms anytime.
• Irrevocable trust: You permanently hand control to someone else to act as a trustee and transfer your assets into the trust’s ownership. You can’t undo an irrevocable trust once it’s created, but you’ll have stronger protection from creditors and estate taxes.

Updating your revocable trust after a divorce might be a two-step process. You’ll want to delete your ex as a beneficiary and trustee if you named them to serve in this capacity. And these advantages all assume that you set up the trust in your sole name, even if you were happily married at the time.

Davakis also suggests using a prenuptial or postnuptial agreement as a precaution against your ex inheriting. “These can waive spousal inheritance rights and clarify asset distribution in the event of divorce or death,” she said.

The Bottom Line

Nothing lasts forever, and marriage is unfortunately not an exception. Trying to handle legal decisions on your own can backfire. Check your state’s probate laws or, better yet, work with an attorney to ensure you get it right according to the rules in your jurisdiction.