Divorce and Death Benefits – How Your Beneficiary is Affected

Divorce and Death Benefits – How Your Beneficiary is Affected

It is a common situation to die without updating important legal documents. While this scenario is not unique to family law, it has significant implications for financial planning after a divorce. Consider what would happen if, after a divorce was finalized, a person died without having changed or updated the beneficiary status on his or her life insurance policy, or other financial asset. The former spouse would still be named as the beneficiary, but the life insurance company would refuse to pay the benefits to the former spouse by claiming that the likely intent was to exclude the former spouse because the parties were divorced. Ultimately, the death benefits from the policy or asset would have to go through probate, rather than simply transfer through the typical life insurance distribution process. To avoid this unintended consequence, the Florida Legislature amended the Probate Code to require affirmative designations of beneficiaries, particularly in the context of a former spouse after a dissolution of marriage.

Florida Statute, Section 732.703, in effect since 2013, voids the designation of a former spouse as a beneficiary if that beneficiary designation was: (i) made before the divorce was finalized and (ii) not updated to reflect the divorce or former-spouse status. The relevant language of the Florida Statute states:

A designation made by or on behalf of the decedent providing for the payment or transfer at death of an interest in an asset to or for the benefit of the decedent’s former spouse is void as of the time the decedent’s marriage was judicially dissolved or declared invalid by court order prior to the decedent’s death, if the designation was made prior to the dissolution or court order. The decedent’s interest in the asset shall pass as if the decedent’s former spouse predeceased the decedent.

In other words, if the beneficiary designation is not made or updated post-dissolution of marriage, Florida law treats the former spouse as though he or she does not exist. This scenario is incredibly important for parties who assume and intend that their death benefits will go to their former spouse, even though a divorce has been finalized. Often, child support and alimony are secured with a life insurance policy that was in effect during the marriage which named the then-spouse as the beneficiary. According to Florida law, in order for the benefits to actually go to the former spouse, the former spouse must be renamed as the policy’s beneficiary post-dissolution. If there are death benefits to be distributed, whether pursuant to a life insurance policy, a qualified annuity, a tax-deferred contract, an employee benefit plan, or an IRA, the designation of the beneficiary must be made after the divorce has been finalized. Parties can clearly convey their estate planning intentions by incorporating specific language in a divorce settlement agreement or final judgment.

Kristin Kirkner is board certified in marital and family law in the State of Florida and has focused her practice solely on family law since 2004. Kirkner Family Law Group is available to assist you in all of your Florida family law and divorce needs and can help safeguard your family with the specific language needed in your settlement agreement to distribute your death benefits as you intend. Contact us today or call (813) 254-0156.

Alimony and the New Tax Law

Alimony and the New Tax Law

On December 22, 2017, President Donald Trump signed the new tax bill into law. While, on its face, H.R.1, known as the Tax Cuts and Jobs Act, appears to haveno correlation with family law, the new tax law actually includes terms relating to alimony, specifically, terms that will drastically change the law you may be familiar with today. Most of the new law’s provisions will take effect on January 1, 2018. However, the new alimony law applies to any divorce or separation decree executed after December 31, 2018 or any decree executed before December 31, 2018 and modified after this date “if the modification expressly provides that [the new tax rules regarding alimony] apply to such modification.”

Section 11051 of the new tax law is entitled “Repeal of Deduction for Alimony Payments.” The current law

as outlined in Section 215 of the tax code allows for alimony and support maintenance payments to be deductible by the payor spouse and includible in income by the recipient spouse. The new tax law eliminates Section 215 of the tax code entirely. Now, family law taxes alimonyalimony and support maintenance payments are not deductible by the payor spouse, and alimony and support maintenance payments are not included in income. Specifically, alimony and separate maintenance payments are removed from the definition of gross income found in Section 61 of the tax code. The new law mandates that income used for alimony and support payments be taxed at the rate applicable to the payor spouse rather than that of the recipient spouse.

To reiterate the new law’s implementation timeline, there are two scenarios:

  1. The law automatically applies to all divorces beginning January 1, 2019; or
  2. The law applies to the modification of any divorce finalized prior to January 1, 2019, so long as the modification documents specifically say so.

Based on this timeline, the next year is critical for considering your options if you are considering filing for divorce. The taxability of alimony can be beneficial to one party and detrimental to the other. Until the new law takes effect, the option remains available to take advantage of the taxability or deductibility of alimony. If you are seeking a Tampa family lawyer or divorce attorney, Kirkner Family Law Group is here to help you to navigate through the changes in the alimony law. Contact us online or at 813-254-0156.

Indemnification After VA Waiver – US Supreme Court Decision

Indemnification After VA Waiver – US Supreme Court Decision

The US Supreme Court announced its decision today in Howell v. Howell.

Here’s a link to download in pdf for your review.

The issue before the US supreme court was whether state courts can order veterans to indemnity former spouses when the military veteran waives his military retirement pay in order to receive VA disability pay.  When a veteran waives a portion of the retired pay, the former spouse’s portion is reduced as well, to the benefit of the veteran and the detriment of the former spouse.

The Supreme Court held that the state court cannot order the veteran to reimburse the former spouse, citing Mansell v. Mansell and reversing the Arizona Supreme Court.

As it stands now, a member/retiree can unilaterally circumvent the rights of a former spouse by accepting VA compensation and waiving retired pay.  In the coming months, I expect that we will see proposals for legislation to address this issue.  In the meantime, this highlights the importance of including clauses for indemnification in the marital settlement agreement or otherwise addressing the indemnification through alimony.

If you have a question about the distribution of military retired pay in a divorce or military pension division, please contact Kirkner Family Law at (813) 254-0156.

How a Skilled Military Divorce Attorney Can Help You

How a Skilled Military Divorce Attorney Can Help You

Divorce proceedings involving parties that are members of the United States Armed Forces pose specific and often convoluted issues that must be handled by someone well-versed in the legalities of military divorce. For example, there are numerous requirements to complete when handling the division of a military retirement or pension, or preparations to consider when a parent is required to appear for military duty. A recent 2016 case in Vermont illustrates an example of how beneficial and necessary a skilled military divorce attorney can be when handling military matters within a divorce.

In 2016, a trial court judge in Vermont refused to divide the then-husband’s military retirement, stating that since the retirement was
not yet vested, that he “would not and could not distribute” the military retirement since the husband had, at the time of the final hearing, no entitlement to his retirement. The judge, in his reluctance to divide the retirement between the parties, pulled both attorneys aside to speak with them and, as a result, the then-wife entered into a stipulation to accept $15,000.00 in exchange for her waiver of any claims to the husband’s future military retirement.

It was later discovered that, in fact, the judge was wrong. Not only was the judge able to distribute the husband’s military retirement, as the law in most states (including Florida) does not require the actual vesting of marital assets as a precondition to those assets being divided upon divorce, but the wife’s portion of the retirement over her lifetime could have been worth nearly $500,000.00, which was lost as a result of the judge’s error and the attorney’s failure to recognize the error.

When the wife’s attorney later realized the judge’s misguidance and that the stipulation was inequitable for the wife considering the law on the matter, she sought to set aside the stipulation “on the ground that she entered into the agreement in reliance on an in-chambers ‘weather report’ in which the trial judge misstated the applicable law.” See Coons v. Coons, 2016 WL 1706665, a Supreme Court of Vermont case on appeal from the Vermont Superior Court – Family Division Docket No. 137-5-14. The Supreme Court of Vermont affirmed the lower court’s decision and did not overturn the stipulation, stating that a mistake of law does not establish a reason for setting aside a binding final stipulation.

Due to the judge’s assumption, and the wife’s attorney’s unawareness of the applicable law regarding military retirement benefits, the wife was unable to receive the benefit of her marital portion of the husband’s military pension. When any member or prior member of the military needs assistance in divorce proceedings, engaging the services of an experienced military divorce attorney is in their best interests. An attorney who consistently practices in the field of military divorce and is knowledgeable regarding the current laws, options, and information that encompass a military divorce proceeding can achieve an equitable settlement or be in the best position to advocate on these issues at trial.

Kristin Kirkner is board certified in marital family law in the State of Florida and has focused her practice solely on family law and military family law since 2004. Kristin has been accepted in the Thirteenth Judicial Circuit for the State of Florida as an expert in military divorces and division of military pensions. Contact us today or call (813) 254-0156 to discuss your military divorce needs.

Divorce and Special Needs Children

Divorce and Special Needs Children

Considering how to care for children in a post-divorce setting is often a stressful and difficult task. If a child has special needs, many less-typical factors must be considered. Whether the child has a disability, diagnosed disorder, or another medical or social issue, a parenting plan and custody arrangement must be in the child’s best interests, and must be crafted in such a way that their needs continue to be met.

A parenting plan is required in all cases where children are involved. The parenting plan outlines each parent’s time sharing arrangements with the children, as well as other important items such as travel restrictions, child care instructions, and school designation. If a child has special needs, additional information and instructions for caring for that child should be outlined, in detail, in the parenting plan. For example, perhaps overnights with one parent may not be acceptable, or the child will need to be removed from school early to attend doctor’s appointments or counseling. If one parent has generally been the caregiver of the child with special needs throughout the marriage, it may be in that child’s best interests for that caregiving parent to have sole decision-making authority over that child’s medical needs. Regardless of the special needs of the child, if any specific instructions are required for that child’s care it should be outlined in the parenting plan.

Child support may be modified when a special needs child is involved. While child support is most often calculated pursuant to the Florida Child Support Guidelines, the number determined may not be sufficient depending on the care required and the severity of the child’s disability or disorder. For example, medical costs, therapists, doctors, medications, caregiver costs, or special education are some of the additional costs to consider for a child with special needs. A predetermined child support amount may not cover the needs of the child, especially if the child’s needs may increase as they grow older. In Florida, child support terminates at the age of majority or at a child’s graduation from high school. Often, however, a special needs child requires support past the age of majority, and specific language and guidance is needed in an agreement to ensure that the child receives support past the age of majority.

Your children are so important. If you are going through a divorce or paternity matter and your child has special needs, it is imperative that the future needs of the child are considered, as well as any needs of the caregiving parent. Kirkner Family Law Group is here to help you create the best possible plan for the future of you and your children. Contact us today or call (813) 254-0156 to discuss your needs.