Dear Mr. Premack: I am the beneficiary for the investments my ex-wife made. She passed away in 2019. The Executrix of her Will told me that my ex Willed everything to her granddaughter. I asked for the paperwork, and she told me I was trying to dig up dirt on my ex-wife. Can the Executrix override the Beneficiary for investments? – J.T.
When two people are married, it is natural to assume that they are going to provide for each other’s continued care if one of them should die. That assumption is no longer valid if the couple gets a divorce. When the Judge issues an order terminating the marriage, that court order and various state laws re-define the financial connection between the ex-spouses.
The divorce decree legally eliminated your name as beneficiary on investments that belong to your ex-wife. While investments like a mutual fund or stock are allowed to have a "pay on death" or a "transfer on death" designation – or may be held in two names with a "right of survivorship" – those designations are altered by divorce.
Section 123.151 of the Texas Estates Code states that any pay on death arrangement ends upon divorce, annulment, or voiding of the marriage when that arrangement was for the benefit of the former spouse or a relative of the former spouse. Further, the divorce decree would eliminate any rights of survivorship by ending joint accounts.
Consequently, the Executor of your ex-wife’s Will did not "override the beneficiary for investments"; rather, because you and your ex-wife divorced, Texas law removed you as beneficiary. That investment passes pursuant to your ex-spouse's Will, not to you.
When a divorce is final, Texas law similarly ends the rights of the ex-spouses as beneficiary in a Living Trust, removes the ex-spouse as Agent under Durable Powers of Attorney, stops each ex-spouse from making medical decisions for the other, removes each ex-spouse’s authority to handle funeral arrangements for the other, takes away each ex-spouse’s priority to be Guardian for the other, and eliminates the appointment of each ex-spouse as an Executor or Trustee for the other.
Please note the word “final” in the above paragraph. There is a time period between when a divorce gets filed and when the divorce is final. While the divorce is pending, you are still spouses, so your almost-ex still has the rights listed above. But you may no longer trust your almost-ex to have those responsibilities or benefits. When you hire a divorce attorney, you should also see your estate planning attorney to adjust the powers given to your almost-ex.
Sometimes, two divorced people remain committed to each other’s welfare and, though not functional as spouses they remain functional as close friends. When that happens, one of the ex-spouses may desire that the other ex-spouse retain various legal roles like Agent or Executor or Heir. If so, then after the divorce is final the ex-spouse who so desires must re-issue legal documents giving the other ex-spouse those responsibilities or benefits.
Your ex-wife could have made a new Will after the divorce and in that Will she could have re-nominated you as Executor or given you various assets in the event of her death. After the divorce she could have signed a new pay on death designation for her investment naming you as the after-death beneficiary. After the divorce she could have signed a new Durable Power of Attorney naming you as her Agent. If in fact she did not reinstate you after the divorce, then because of the divorce decree and the state laws you are out of the loop and do not receive those items you may have otherwise received.
As you can see, a pending or final divorce is a very strong reason to update and to re-issue estate planning documents to match the new circumstances.
Paul Premack is a Certified Elder Law Attorney for Wills and Trusts, Probate, and Elder Law issues. He is licensed to practice law in Texas and Washington. To contact us, click here.
Column published on March 8, 2022.