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The Effect of Divorce on the Distribution of Property after Death

The Effect of Divorce on the Distribution of Property after Death

05 / July 2016

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The Effect of Divorce on the Distribution of Property after Death

Receiving the final copy of a divorce decree usually produces a cathartic response in the parties, as they now have verifiable proof the marriage is both legally and emotionally over. It is at this point most ex-spouses can finally start to heal and move on from this difficult process. A divorce decree is an enforceable legal order that either spouse can use to compel compliance with the court-approved terms of the settlement agreement if a violation occurs. The settlement agreement contains provisions on issues like property division, child custody, child support and alimony. While it may seem that this court order should encompass all the issues that could affect both parties and extinguish the rights of each to share in the benefits of the other, there are arrangements, particularly contracts, that are not affected by a dissolution of marriage. A recent news story in the Detroit Free Press illustrates why all legal agreements that list the former spouses as parties to a contract or as beneficiaries should be reviewed and amended as appropriate. A Michigan appeals court awarded a woman the proceeds of her ex-husband’s life insurance policy after he failed to remove her as beneficiary during his lifetime. While there were conditions initially placed on her collection of the proceeds, the court ultimately decided that the fact that the ex-husband had ample time and notice to remove her name and chose not to do so, plus his decision to not name an alternate beneficiary, was enough to justify giving it to his ex-wife. Given that most divorces happen years before a party dies, it is important to understand what happens to certain agreements when a couple divorces and the additional steps each may need to do in order to protect their property and investments.

Property Division in Divorce Generally

The property division rule in Michigan is to divide the property fairly between the parties, which does not necessarily mean equally. Further, Michigan includes any property that appreciates, improves or otherwise increases in value during the marriage in the marital estate, meaning that property that was brought into the marriage by one party could be awarded to the other in divorce if that party contributed to an increase in value. When the divorce decree is issued, that piece of paper acts as a quitclaim deed for real estate and a bill of sale for personal property and has the effect of automatically transferring title to the person listed as owner in the divorce settlement.

Rights to Benefits that Are Paid After Death

When it comes to future rights a spouse could have in an annuity, insurance policy or pensions, Michigan law requires the divorce settlement to determine if an ex-spouse will retain any rights in such a policy or retirement benefit. This typically means a spouse will either take a share of the benefit proceeds, or waive all rights to the money. However, if the divorce decree does not touch on this issue, the beneficiary remains with the ex-spouse unless the policy or retirement account holder removes the ex-spouse as beneficiary in the policy or account documents. In addition, the U.S. Supreme Court issued a decision that government pension rights cannot be waived in a divorce decree, which means the waiver must be done by filing the proper forms with the plan administrator before the divorce is finalized.

Contact a Divorce Attorney

Issues around property division and spousal rights in retirement accounts and insurance policy are complex issues that require the guidance of an attorney to ensure the intention of the parties is carried out. The Clinton Township law firm of Iafrate & Salassa, P.C. works to protect the property interests and meet the goals of their clients in divorce cases. Contact us for more information at a free initial consultation.

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