Many people come to me with questions about Arizona divorce law and what happens to their assets in the case of a divorce.
Before anything else, I always suggest people change their beneficiary designations and rewrite wills, trusts, or estate plans in the case of divorce. However, accidents can and do happen, and someone may pass away before they are able to make the changes, but after a divorce is finalized. In that case, Arizona has specific laws that apply.
Arizona Divorce Law and Your Will
In the event you divorce and something happens to you, your will remains valid. Your ex-spouse, however, is no longer considered a potential beneficiary, fiduciary, executor, guardian, or trustee for your estate. You must be careful here because a separation decree will not disqualify your spouse. In addition, an ex-spouse is removed as an agent for financial or healthcare power of attorney documents, although a power of attorney remains valid unless another person is willing to service in that role.
Life Insurance Following Divorce
What happens to life insurance benefits? Arizona divorce law will automatically disqualify the ex-spouse as a beneficiary unless specifically stated otherwise in a new beneficiary designation filed after the divorce.
The same is true for pay-on-death, transfer-on-death, or in-trust-for designations. With these, the ex-spouse is disqualified. Therefore, it is important to change all your beneficiary designations once the divorce becomes final, just in case your ex tries to collect before any changes are made.
Divorce and Estate Planning
When it comes to profit sharing plans, 401(k)s, and other ERISA plans, the person named as the beneficiary will receive the assets. In short, if an ex-spouse remains as beneficiary, he or she will receive the benefits. Again, it is important to remember to update all beneficiary designations on everything after a divorce.
That being said, the distribution of IRAs assets is more confusing. The IRA custodian will treat the ex-spouse as the beneficiary if there has been no knowledge of the divorce. Despite Arizona divorce law disqualifying the ex from receiving benefits, there has been precedent for an ex-spouse to contest the matter in court and win.
A living trust has similar rules as a will. For a joint marital property trust, each spouse will be treated as having predeceased the other. That means if one spouse passes away before the divorce settlement is final, half the community and separate property would be distributed to the beneficiaries. For separate property trusts, the ex-spouse is disqualified as a potential beneficiary or trustee.
As for property held in joint tenancy, it will automatically convert to tenancy-in-common. In short, the property will no longer go automatically to the survivor. The property will now be subject to probate, and the court will decide how to award it.
Questions about Your Estate Plan and Arizona Divorce Law?
At the Poulos Law Firm, we recommend clients review their estate plans annually. This way, if there are any issues, you’ll be able to manage them in a timely manner. Otherwise, you may end up having an estate plan that doesn’t suit you or your family.
If you have questions about how Arizona divorce law affects your estate plan, please schedule an appointment with our office. We’re happy to talk with you about your unique needs and ensure your legacy is protected.