By Jeff Moore
If you are in the throes of tying the knot, there may be a few important estate planning ramifications for which your wedding planner failed to prep you. For example, marriage actually revokes your current Will in its entirety. In addition, marriage effectively designates your new spouse as the new beneficiary on your retirement plan account—and that’s regardless of whether you intended to or not. Not so similarly, however, a divorce may not effectively remove an ex-spouse as that same beneficiary. So whether you’re in the middle of “I do,” or perhaps in “I did,” here are things to consider when it comes to your current marital status.
Marriage and the Will
As mentioned above, a Will executed prior to a marriage is revoked in its entirety by the subsequent marriage. You may be asking, “Really? Can they do that?!” Yes. The law presumes that by marriage, you intend to provide at least something to your new spouse. Accordingly, the law presumes that your marriage revokes the prior Will. That said, you should take an appropriate course of action as follows: (1) amend the Will to provide that your subsequent marriage shall not revoke the Will, (2) timely execute a prenuptial agreement containing the provision that your Will shall not be revoked by the subsequent marriage, or (3) execute a new Will or reinstate your original Will following your marriage.
You may be saying, “Hey, no worries! I belong to that 65% of Americans who never executed a Will!” Well, you do now. The State of Oregon actually writes one for you. Granted, it may not be what you want it to say, but you have one.
So whether you had a Will and it was revoked, or you have the Oregon default or “intestate” version, your estate plan may drastically change upon marriage or remarriage. For example, say you have two children from a previous marriage and just got remarried. What happens if you fall off the cruise deck during the honeymoon? The State of Oregon provides that one-half of your estate will pass to your new spouse of three days, and the other half will be divided equally among your children. That may or may not be what you wanted or anticipated (e.g., perhaps you wanted all of it to go to the new spouse…).
(NOTE: This rule of revocation by marriage does not apply to a Living Trust; however, it would apply to the “pourover Will” associated with a Living Trust.)
Marriage and the Retirement Plan
If you are one of the many Americans who participate in a qualified retirement plan (e.g., a 401(k), profit sharing or defined benefit plan), be aware that unless your spouse—new or not—specifically waives his or her right to inherit the plan benefits,in most cases the spouse is by default the sole beneficiary. So let’s take that same “honeymoon” example from above. Does that mean that the surviving three-day spouse is entitled to all of your 401(k) account, even though you named your two children the day before the wedding? In most cases, yes. Depending on the plan provisions, the subsequent marriage itself usually revokes all prior beneficiary designations in favor of your new spouse, regardless of what your beneficiary designation provided prior to the wedding and regardless of what you and your new spouse might have intended.
The challenge with retirement plan benefits is that any action to change this result requires the new spouse’s signed consent and waiver. Unlike the unilateral action of simply modifying, re-executing or reinstating a Will, a change to your retirement plan designation requires this additional signed consent and waiver by your new spouse.
You may be asking, “But what about a prenuptial agreement? Aren’t I able to require a new spouse to sign appropriate documentation to effectuate my intended beneficiaries?” Yes and no—but plan on no. When it comes to qualified retirement plans, the laws generally disregard anything done in a prenuptial agreement. As draconian as that may be, that is the current law. But needless to say, having thorough discussions and agreements in place prior to the marriage is critical.
Let’s say there is no new spouse—only a former spouse. While the final divorce decree may have authorized you to remove your former spouse as the primary beneficiary in favor of your children (or any other beneficiary), did you actually follow through and make that change? Unlike marriage, which automatically designates the new spouse as the beneficiary of the retirement plan benefit, divorce does not always automatically remove a former spouse as the beneficiary. Again, it depends on the retirement plan provisions. In short, just because the court decree authorized the change in the beneficiary designation, it does not mean that the beneficiary designation has actually changed. If no action is taken on your part to effectuate the change, it is possible that your former spouse could still be named as the primary beneficiary of the retirement benefits.