There are multiple ways that people leave money to ex spouses, and some may surprise you.
Leaving your ex in your will after you are separated.
You decided the marriage needs to end, but you haven’t divorced yet, so you are separated from your spouse. You die. Surely the court knows that you don’t want your stuff to go to him or her! This is wrong, however, because if you were still married (even if you had filed for divorce already), your assets would go to your spouse if he or she is named in your will. (Or, even if not, see the prior post).
Virginia does have a law that automatically removes enforcement of a named spousal beneficiary (or personal representative) after the divorce is final, but not before. Note that there is no such thing as legal separation in Virginia.
Forgetting to update beneficiary designations after you separate or divorce.
When you die, the beneficiary designations you have made on any of your retirement or other financial accounts will most likely be followed, even if you had already divorced and did not remove your ex’s name.
Again, you might think, “Wouldn’t they know that I would not have wanted my money to go to someone I had divorced?”
Well, not really. Once you are gone, there is no way to know what you wanted done with your assets other than the instructions that you left with the financial institution.
So, it is vital that you update these designations as soon as you separate from your ex (even before the divorce is final) to make it crystal clear who should get your money.
Beneficiary designations should be updated for the following financial accounts:
- Employer retirement plans
- Individual Retirement Accounts (IRA)
- Life insurance
- Annuities
- Health savings accounts
- Transfer on Death (TOD) investment accounts
- Payable on Death (POD) bank accounts
Leaving money to minor children.
If you and your ex have minor children together, and you die, the children will not be able to directly inherit any money you have left to them.
And, by operation of law, if you had custody of the children, custody will automatically go to the other parent (unless he or she is unfit for some reason as determined by a judge).
This means that your ex will be able to petition the court to receive access to the funds that you have left for your children. Your ex will likely be named as financial guardian, responsible for handling the funds on behalf of the children.
Depending on your situation, this may or may not be something that you are comfortable with. If not, I describe an alternate strategy in the next article.
To schedule a free consultation, contact Lisa at (866) 980-0838.