DIVORCED SPOUSE INHERITS WINDFALL
OR HOW TO “DISINHERIT” CURRENT SPOUSE AND CHILDREN
Let’s assume the following facts, which in reality, are not that uncommon. After years of marriage, it is decided that a divorce is the best course of action for both parties. Unfortunately, the split up was very acrimonious.
Let’s assume that the wife gave up her career to care for the children and the husband was the breadwinner. Husband remarries and the second marriage produces another two children. The husband has now fathered four children; two by each marriage.
The divorce decree stated that the husband must pay his ex-wife alimony. Second wife detests seeing that alimony payment being made every month and detests the first wife.
Husband dies and the second wife is devastated by her husband’s death. The first wife does not attend his funeral. She is somewhat delighted that the b****** passed away. Her only remorse is that she will surely miss that monthly alimony check. The second wife told the funeral director that as soon as she receives the proceeds from her husband’s $500,000 insurance policy, he will be paid in full.
Since the deceased husband’s W-2 income was the primary source of income for his second family, the second wife inquires from her husband’s employer and investment advisor as to how much money she will be receiving from his pension plan and IRA accounts.
Can you imagine if you were the second wife and learned that your deceased husband never changed the beneficiaries on his insurance policy, pension plan, and IRA accounts? When all of these accounts were opened, he dutifully named his spouse (first wife) and the two children from that first marriage as his beneficiaries. When he remarried, he failed to change his designated beneficiaries. Accordingly, the second wife and the two children from the second marriage inherit nothing.
Although the first wife did not attend his funeral, she may decide to visit his grave site each year on the anniversary date of the divorce and profusely thank him.
LESSON LEARNED: Insurance policies (life and annuity policies), pensions, retirement plans, IRAs, brokerage accounts do not get inherited via a will. The proceeds from these types of assets are inherited based on their named beneficiaries. When life events occur (deaths, births, medical conditions, etc.), one is not likely to remember to inquire if beneficiary changes need to be made. Accordingly, it is very prudent to periodically request from your advisors a listing of the named beneficiaries to make sure that such beneficiaries meet your current wishes and the needs of those that you love.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.