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Birmingham Bar Association Bulletin | Spring 2015

Divorce law ment, which does not incorporate a property settlement agreement but does give each spouse his or her IRA without addressing the designation of beneficiaries, destroys the expectancy that one spouse, as the designated beneficiary, may have in the other’s IRA?” Relying on Flowers and Pitts, the court noted that “Alabama has no statute governing the nonprobate transfers of multi-party accounts such as life insurance or retirement and pension plans.” In awarding the ex-spouse the proceeds of the IRA, the court stated that the divorce “had no legal effect upon the designation of the wife as the beneficiary.” Jointly Owned Property Married couples generally own assets, such as real estate or bank accounts, as joint tenants with right of survivorship. Their divorce does not ipso facto terminate the survivorship feature of property ownership. If the divorce decree expressly mentions an interest in real property and orders its disposition, the joint tenancy will be severed, thereby converting the ownership between the divorced spouses to a tenancy in common.6 However, if the divorce decree does not specifically address the real property in question and one of the ex-spouses later dies, the surviving ex-spouse will acquire the entire ownership interest by survivorship notwithstanding the divorce. “When a divorce decree is granted without any mention of the division of the parties’ jointly owned property, each party retains the same right, title, claim, or interest therein which they held prior to the divorce.”7 The results would be the same with bank accounts owned jointly with right of survivorship. 8 In short, in Alabama a divorce does not automatically sever a joint tenancy with right of survivorship or create tenancies in common between the parties for either real property or bank accounts. A Statutory Solution As can be seen from the foregoing authorities, Alabama law is divided on the effect of a divorce upon an estate plan. On the one hand, probate transfers to a former spouse are automatically revoked in the event of a divorce by virtue of Ala. Code §§ 43-8-137 and 43-8-252; while nonprobate transfers remain unaffected. Section 2-804 of the Uniform Probate Act has been proposed to unify the law for both types of transfers. It would prescribe that, unless expressly provided otherwise by an agreement between the spouses or a court order, a divorce or annulment of a marriage would: (1) eliminate the former spouse and relatives of the former spouse as a beneficiaries of life insurance, retirement plans, and revocable inter vivos trusts; (2) sever any interest owned jointly with right of survivorship between the divorced spouses, thereby creating tenancies in common; and (3) cancel the nomination of the divorced spouse from any fiduciary capacity, such as trustee, agent, guardian or conservator. Section 2-804 is currently being reviewed by a committee of the Alabama Law Institute for the possibility of submitting it for enactment by the Alabama legislature. If adopted into law, this section would reverse the outcome of future cases such as Flowers, Pitts, Walden and Smith. Conclusion Most of our probate laws were adopted at a time when the primary asset of value was land, the Will was the essential estate planning document, and marriages were generally terminated by the death of a spouse. In view of the fact that today most wealth is personal property, that substantial sums of money now pass outside of probate by “will substitutes,” and that marriages are frequently terminated by divorce, it is appropriate that both probate and nonprobate assets should be treated identically by statute. The enactment of Section 2-804 of the Uniform Probate Code into law in Alabama would achieve that objective. Nevertheless, it is incumbent upon estate planning practitioners to identify all of the assets of our estate planning clients and to determine how each asset would pass in the event of either death or divorce. More importantly, when a divorce proceeding is contemplated or filed, the attorney must assist the client in a comprehensive reevaluation of all assets which would pass in the event of the client’s death to avoid potentially undesirable results such as the cases cited above. G (ENDNOTES) 1 See Ala. Code § 43-8-41; Ala. Code § 43-8-70; Ala. Code § 43-8-90; Ala. Code § 43-8-110; Ala. Code § 43-8-111; Ala. Code § 43-8-112. 2 637 P.2d 75 (Okla.1981). 3 224 So.2d 590 (Ala. 1969). 4 435 So.2d 81 (Ala.Civ.App. 1982) 5 686 So.2d 345 (Ala.1996) 6 Lawley v. Smith, 409 So.2d 809 (Ala.1982) 7 Smith v. Smith, 892 So.2d 384 (Ala.Civ. App. 2003) 8 Ala. Code § 5-24-12 A divorce would affect the amount passing to the ex-spouse if the account is owned jointly among the decedent, the ex-spouse, and additional third parties. In such event, the surviving ex-spouse would share the account equally with the third party cotenants since the ex-spouse would no longer qualify under Ala. Code § 5-24- 12(a) as a “surviving spouse.” However, if this account is owned solely by the decedent and the ex-spouse, the former spouse would acquire the entire account in the absence of a provision in the divorce decree to the contrary. 18 Birmingham Bar Association


Birmingham Bar Association Bulletin | Spring 2015
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