One detail that people often overlook following a divorce is to update their estate plan. For example, the will that you signed during your marriage probably left most of your property to your then-spouse and named them as executor of your estate. What happens if you forgot to sign a new will after the divorce? Does that mean your ex gets everything?

The short answer is “no.” Maryland law provides for the automatic revocation of any provision in a will (or revocable trust) relating to a former spouse upon a divorce or annulment. This does not mean the entire will is invalidated. Basically, the law instructs the courts to carry out the remainder of your will as if your former spouse had died before you.

Court of Special Appeals Finds No Issue With IRA Custodian’s “Re-Designation” Requirement

But not all of a person’s assets are necessarily controlled by a will or trust. For instance, if you have a pension plan or life insurance policy, the custodian for that asset will have you sign a separate beneficiary designation form. Does the automatic revocation-upon-divorce rule apply to these assets as well?

Here, the answer is a bit more complicated. A number of states have adopted such a rule specific to beneficiary designations. Maryland is not one of those states. However, many financial institutions that act as custodians may implement their own rules requiring “re-designation” of a former spouse as a beneficiary following a divorce.

According to a recent decision from the Maryland Court of Special Appeals, Hartley-Bartman v. Merrill Lynch, such policies are enforceable under Maryland law. This case involved a plaintiff who attempted to claim 50 percent of her late ex-husband’s IRA with Merrill Lynch. The deceased setup the IRA in 2016 while the parties were still married. The couple divorced in 2018 and he passed away the following year.

Merrill Lynch told the plaintiff that she was still listed as a 50% beneficiary of the IRA, as her former husband never filed a new beneficiary designation after the divorce. Nevertheless, Merrill Lynch said that under the contracts governing the IRA, the former husband was required to “re-designate” the plaintiff as a beneficiary after the divorce. Since he never did so, Merrill Lynch considered the original beneficiary designation revoked.

The plaintiff sued Merrill Lynch for breach of contract. Both the circuit court and the Court of Special Appeals ruled in favor of Merrill Lynch. The appellate court explained that the “re-designation provision” of the IRA contracts was enforceable under Maryland law. Among other arguments, the Court rejected the plaintiff’s claim that Merrill Lynch’s practices were “contrary to public policy” given that the Maryland legislature did not adopt an automatic revocation-on-divorce rule for beneficiary designations. The Court noted the fact the legislature extended such rules to other non-probate assets–i.e., those placed in a revocable trust–suggested there was no such conflict.

Contact Clinton, Maryland, Family Law Attorney Robert Castro Today

This article has been provided by the Law Office of Robert Castro. For more information or questions contact our office to speak to an experienced lawyer at (301) 870-1200.

Source:

https://scholar.google.com/scholar_case?case=5191751825793591517