When important changes occur in life, it is advisable to reevaluate your estate planning to ensure it continues to meet the goals and objectives you have for your estate and your beneficiaries – and going through a divorce is no exception.
In the Commonwealth of Virginia, the final decree of divorce automatically impacts certain limited aspects of estate planning but not all – and a separation – even a lengthy separation for many years – does not. Therefore it is important to note what relief is provided automatically by statute and when you must act to change your estate documents to achieve your estate goals.
Revocation of Will by Divorce
Once a divorce decree is entered, all dispositions made to the former spouse in a will are revoked unless expressly stated otherwise according to Section 64.2-412 of the Code of Virginia. Property of the estate shall pass as if the former spouse had predeceased the testator (a testator is the person who made the will). Likewise, any appointment of the former spouse as executor of the will is revoked. The public policy behind this historically was, “In enacting Code § 64.1-59 the obvious purpose of the General Assembly was to incorporate into statute the presumed intent of a testator that any provision in his will for the benefit of his spouse be terminated in the event of their divorce.” Papen v. Papen, 216 Va. 879 (1976). §64.1-59 of the Virginia Code has since been repealed, but the intent of the General Assembly remains valid, and has been included in §64.2-412, which also provides similar treatment in the event of an annulment.
Importantly, gifts and appointments made to the former spouse’s family remain valid and enforceable and are not revoked by divorce. Therefore, if you bequeathed your home to your former spouse’s son from a prior marriage, the son will still get the house unless you change your will.
The Impact of Separation
Separation does not revoke a spouse’s right to the other’s estate. A spouse is still a beneficiary and will receive the property bequeathed by will. Where there is no will, the separated spouse will continue to be eligible to claim the surviving spouse’s share (referred to as the “elective share”) of the augmented estate pursuant to Virginia Code § 64.2-304. That share is either one-third of the augmented estate if the decedent left surviving children or their decedents, or one-half of the augmented estate if the decedent was not survived by children or their decedents (the “augmented estate” is a rather technical concept, but in general, it refers to more than just the “probate estate;” it also refers to other assets that may otherwise pass via beneficiary designation or right of survivorship, or have been gifted at an earlier date).
The only way to impact this outcome during separation is by modifying your estate documents or by entering into a written separation agreement that clearly articulates the parties’ desires with regard to waiving rights to one another’s estate. In crafting the separation agreement, it is critically important to consider all the assets that pass upon death and clearly articulate the parties’ agreement. For example, in Woodmen of the World Life Ins. Co. v. Carol L. Synowietz, the court held that “broad, all-embracing, clear contractual language of the release in the separation agreement was a release of all property rights of the wife in the property of the insured, which included the life insurance proceeds at issue.” Woodmen of the World Life Ins. Co. v. Synowietz, 32 Va. Cir. 264 (Cir. Ct. 1993) (emphasis added). Hopefully, this ruling was consistent with the parties’ mutual intent, but given that the wife was involved in protracted litigation over the treatment of those life insurance proceeds, we can only conclude that there was not complete agreement to this outcome when the separation agreement was signed.
Beneficiary Designations and Divorce
Even though revocation of a will is automatic upon divorce as noted above, unless expressly stating otherwise by agreement or in the divorce decree, other beneficiary designations may not automatically be revoked. Section 20-111.1(A) of the Virginia Code states that beneficiary designations to the former spouse and death benefits payable to the former spouse are revoked upon a final decree of divorce or annulment, absent a written agreement that provides for a contrary result. Under subsection B, the death benefits include “any payments under a life insurance contract, annuity, retirement arrangement, compensation agreement or other contract designating a beneficiary of any right, property or money in the form of a death benefit.” VA. Code § 20-111.1(B). This section would appear to have broad application; however, death benefits to or under any trusts are specifically excluded by Section 20-111.1(C), and federal law may preempt the application of this section to many death benefits.
For example, the United States Supreme Court has held that Virginia Code § 20-111.1 is preempted by the Federal Employees’ Group Life Insurance Act (“FEGLIA”), which is the world’s largest group life insurance program, in Hillman v. Marretta, 133 St.Ct. 1943 (2013), aff’g, 283 Va. 34 (2012). In that case, Warren Hillman named then-spouse, Judy Maretta, as the beneficiary of his FEGLIA life insurance policy in 1996. They subsequently divorced in 1998. Warren married Jacqueline Hillman four years later, but he failed to change the name of the beneficiary of his life insurance policy. After Warren died unexpectedly in 2008, his first wife Judy filed a claim for the life insurance death benefit. Thus began a five-year court battle between Judy and Jacqueline that went all the way to the United States Supreme Court, and resulted in Judy – whom Warren divorced over fifteen years prior – receiving his life insurance death benefits simply because Warren failed to change the designated beneficiary after their divorce.
In response to the Hillman decision, Virginia Code Section 20-111.1 was amended to require a notice regarding death benefits to be included in “conspicuous, bold print” in divorce decrees. The amendment of subsection E provides that such notice shall contain the following language:
Beneficiary designations for any death benefit, as defined in subsection B of § 20-111.1 of the Code of Virginia, made payable to a former spouse may or may not be automatically revoked by operation of law upon the entry of a final decree of annulment or divorce. If a party intends to revoke any beneficiary designation made payable to a former spouse following the annulment or divorce, the party is responsible for following any and all instructions to change such beneficiary designation given the provider of the death benefit. Otherwise, existing beneficiary designations may remain in full force and effect after the entry of a final decree of annulment or divorce.
Accordingly, insurance policies, retirement plans, pension plans, and social security benefits should all be amended by the testator in order to ensure that the former spouse is not listed as a beneficiary of the death benefits.
The safest way for an individual to ensure that their former spouse is no longer listed as a beneficiary is to amend his or her insurance policies, retirement plans, will, etc. to reflect that the former spouse is no longer listed as a beneficiary. During separation, consider estate documents when drafting a separation agreement to include express waivers of any right of either spouse to the other’s estate. A waiver that clearly expresses both parties’ intentions as to their individual estates will possibly prevent litigation if one of the spouses predeceases the other before the divorce is final.