The term "gray divorce" is commonly used to describe later-life separations, but "golden divorce" might be a more fitting term, suggesting optimism and new beginnings. This concept reminds me of the beloved 1980s sitcom The Golden Girls, which portrayed four older women living together in Miami, Florida.1 They embraced their independence while navigating life’s twists and turns, and supporting each other with humor and grace. Similarly, many older adults are seeking a fresh start in their golden years, and divorce is sometimes a part of that journey.
An increasing number of couples aged 50 and older are opting for divorce, a decision that, while emotionally complex, brings unique financial and legal challenges, especially as many are nearing or have entered retirement. This article discusses the rise in golden divorces, the essential role of estate planning, and the critical need to keep beneficiary designations current, particularly in states like Texas and Florida.
Why Are Golden Divorces on the Rise?
Although divorces among couples aged 50 and above have surged in recent years, divorce rates for those aged 65 and older have tripled since 1990, primarily driven by greater financial independence and evolving societal norms.2 Many Baby Boomers married young and stayed married for decades but are now unwilling to remain in unhappy relationships.3 Financial stability and personal independence often empower older adults to seek a divorce, commonly due to financial disagreements, infidelity, or differing retirement goals.4
Although golden divorces present significant emotional and financial challenges, particularly for women re-entering the workforce after years of caregiving, they also offer opportunities for personal growth. This trend highlights the importance of adept financial management, as dividing assets like retirement accounts, property, and investments can be intricate for older couples. Estate planning is vital to ensure a smoother transition during this life change, helping address asset division complexities and secure financial stability post-divorce.
The Intersection of Golden Divorce and Estate Planning
Golden divorces involve not only the division of marital assets but also substantial revisions to estate plans. It is crucial to update important documents such as wills, which may still name a former spouse as executor or beneficiary. If not updated, these documents could lead to unintended inheritances. Likewise, powers of attorney and health care directives should be revised to reflect new trusted individuals and any trusts listing an ex-spouse as a trustee or beneficiary need to be amended.
Beneficiary designations on retirement accounts and life insurance policies are especially critical as they generally override will provisions. These designations must be updated post-divorce to ensure assets do not inadvertently pass to an ex-spouse. Given the significant role of retirement accounts in asset division, understanding the differences between ERISA and non-ERISA retirement accounts is essential.
What is ERISA?
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that governs employer-sponsored retirement accounts like 401(k) plans and pensions, and some types of employer-sponsored life insurance policies, establishing protections for account holders and beneficiaries while overriding many state laws.5 Under ERISA, spousal rights are prioritized, meaning a spouse is automatically entitled to be the beneficiary of an employer-sponsored retirement account unless they waive this right in writing.6 This can lead to complications if the beneficiary designation is not updated post-divorce. Even after a divorce, an ex-spouse could inadvertently remain the designated beneficiary unless a new designation is submitted or waived through a Qualified Domestic Relations Order (QDRO).7 The ERISA plan administrator will uphold the original designation until an official change of beneficiary form is submitted, highlighting the crucial importance of making timely updates.
Non-ERISA Accounts
Non-ERISA accounts, including Individual Retirement Accounts (IRAs) and most privately purchased life insurance policies, are governed by state laws. This distinction is particularly relevant in community property states like Texas, where retirement savings accumulated during the marriage are considered joint property.
Texas Beneficiary Designation Rules
Texas, as a community property state, considers retirement savings accumulated during the marriage as jointly owned by both spouses.8 However, after a divorce, Texas law automatically revokes an ex-spouse’s status as a beneficiary unless a divorce decree or a post-divorce agreement explicitly states otherwise.9 In such cases, the ex-spouse is treated as having predeceased the decedent. Nonetheless, for ERISA-governed insurance and retirement accounts, such as 401(k)s and pensions, federal law can override state law. This means that unless you specifically update your beneficiary designation, your ex-spouse could still inherit those funds despite the divorce.
In Hennig v. Didyk, the decedent, Matthew Michael Didyk, insured by an ERISA-governed life insurance policy, failed to update the beneficiary designation from his former wife, Wendy Jeanelle Hennig, to another person after their divorce, leading to a legal dispute over the $377,897.26 in life insurance proceeds with his father, Michael “Miro” Didyk, who was the independent administrator of his estate.10 Although the policy was governed by ERISA and the beneficiary designation had not been updated from Wendy Hennig, the court’s decision was based on a contractual waiver in the divorce decree where the decedent was awarded all rights to the life insurance policies, effectively divesting Wendy of any claim to these assets.11
Under Texas Family Code § 9.301, a spouse’s designation as a beneficiary is automatically rendered ineffective upon divorce unless explicitly reaffirmed, which was not done in this case, leading the court to rule that ERISA does not preempt state laws regarding post-distribution rights to these funds.12 The issue in this case was governed by state law per the terms of the divorce decree, making the dispute over the life insurance proceeds a matter of enforcing the divorce decree, not an ERISA issue, thereby allowing state law to determine the rightful recipient of the proceeds.
Unlike in Kennedy,13 the court in Hennig emphasized the rights to the life insurance proceeds after they had been distributed to the named beneficiary, Wendy, and determined that Texas state law, specifically the divorce decree, could define the ultimate entitlement to these proceeds, effectively nullifying Wendy’s beneficiary rights pursuant to state law. This approach differed significantly as the court considered the post-distribution scenario and concluded that state law could apply without conflicting with ERISA’s preemption, since the funds had already been distributed according to the terms of the ERISA-governed plan.
Florida Beneficiary Designation Rules
In Florida, like Texas, an ex-spouse’s beneficiary status is automatically revoked after divorce for non-ERISA life insurance and retirement accounts, unless a court order or divorce decree states otherwise.14 However, in Crawford v. Barker,15 the court did not uphold the “divorce revokes” rule pursuant to Florida Statutes § 732.703 because the primary issue revolved around the interpretation of a marital settlement agreement and its impact on beneficiary designations that had not been explicitly changed during the divorce proceedings. In this case, the court treated the marital settlement agreement as a contract, noting that it failed to explicitly mention who would receive the death benefits or proceeds from the deferred compensation fund; therefore, the statute did not apply to revoke the original beneficiary designation.16 The court’s decision was based on a combination of interpreting the marital settlement agreement and existing beneficiary designations under contract law, rather than applying the “divorce revokes” rule directly, highlighting the importance of explicit language in legal documents regarding the disposition of assets upon divorce.
As you can see, relying on state law for automatic changes to be effective post-divorce can be risky. It is always better to actively update your beneficiary designations to ensure there is no confusion or legal challenges down the road. Failing to update your beneficiaries could leave your estate in legal limbo or even result in your assets being distributed to someone you no longer intend to benefit.
1The Golden Girls (NBC television broadcast Sep. 14, 1985 - May 9, 1992) (created by Susan Harris); see also Paul Verhoeven, The enduring joy of Golden Girls: a wildly sassy sitcom that will always cheer you up, Guardian Media Group, (Aug. 1, 2023), https://amp.theguardian.com/tv-and-radio/2023/aug/02/golden-girls-tv-sitcom-enduring-joy-dorothy-rose-betty-white-blanche
(last visited Oct. 14, 2024).
2 Sharon Jayson, Divorce Skyrocketing Among Aging Boomers, AARP, (Aug. 1, 2023), https://www.aarp.org/home-family/friends-family/info-2023/gray-divorce-trend.html (last visited Oct. 14, 2024).
3Id
4Id
5See U.S. Dep’t of Labor, Employee Retirement Income Security Act (ERISA), https://www.dol.gov/general/topic/retirement/erisa (last visited Oct. 15, 2024).
6 See 29 U.S.C. § 1055(c)(2).
7 See Kennedy v. Plan Adm’r for DuPont Sav. & Inv. Plan, 555 U.S. 285, 297-298 (2009) (holding that a waiver of pension benefits in a divorce decree that is not executed through a QDRO does not override a plan beneficiary designation under ERISA).
8See Texas Family Code § 3.002 (any property acquired by either spouse during the marriage is generally considered community property, meaning it is jointly owned by both spouses).
9See Texas Family Code § 9.302 (unless the divorce decree or a specific agreement states otherwise, the designation of a former spouse as a beneficiary of life insurance or other financial assets is automatically revoked upon divorce).
10Hennig v. Didyk, 438 S.W.3d 177 (Tex. App. 2014).
11Id. at 182-184
12Id
13Kennedy, supra note 7.
14Florida Statutes § 732.703 (upon divorce, the designation of a former spouse as a beneficiary for certain non-probate assets—including IRAs and life insurance policies—is automatically revoked, unless the divorce decree or other legal agreement explicitly states the former spouse should remain the beneficiary).
15Crawford v. Barker, 64 So. 3d 1246 (Fla. 2011).
16Id.
