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Birmingham Bar Association Bulletin Winter 2015

Divorce Law effective September 1, 2015. This new law effectively amends Alabama’s Probate Code and is modeled after Section 2-804 of the Uniform Probate Code. The new law provides for the automatic revocation of non-probate assets upon divorce. It states: “Except as provided by the express terms of a governing instrument, a court order, or a contract relating to the division of the martial estate made between the divorced individuals before or after the marriage, divorce, or annulment, the divorce or annulment of a marriage: revokes any revocable disposition or appointment of property made by a divorced individual to his or her former spouse in a governing instrument.”1 Act 2015-312, Section 1(b)(1)(a). This applies to the transfer of nonprobate assets such as revocable intervivos trusts, life insurance and retirement plan beneficiary designations, transferon death accounts, and other revocable dispositions. It does not apply to irrevocable transfers of property interests or to insurance policies on which the former spouse pays the premiums or is named as the owner following the divorce. Essentially, the new law provides that a valid divorce among two parties automatically revokes a beneficiary designation as to a former spouse unless otherwise provided for as part of a divorce.   Under Alabama probate law, a former spouse has long been treated as predeceased with regard to an inheritance under a Last Will and Testament. This new statute creates a similar rule for nonprobate transfers to a former spouse. It states: “Provisions of a governing instrument are given effect as if the former spouse and relatives of the former spouse disclaimed all provisions revoked by this section…” Act 2015-312, Section 1(d). The former spouse is treated as if he/she effectively renounced any claim in the interest prior to the divorce. Act 2015-312 also addresses the interests of a former spouse in real property: “Except as provided by the express terms of a governing instrument, a court order, or a contract relating to the division of the marital estate made between the divorced individuals before or after the marriage, divorce, or annulment, the divorce or annulment of a marriage: severs the interests of the former spouses in property held by them at the time of the divorce or annulment as joint tenants with the right of survivorship transforming the interests of the former spouses into equal tenancies in common.” Act 2015-312, Section 1(b)2. Under this provision, if an interest in real property is not otherwise addressed in a valid divorce, the parties become equal tenants in common in any real property held by the parties. By operation of a divorce, the parties would no longer be joint tenants with a right of survivorship. Thus, a surviving former spouse would have no claim to a deceased former spouse’s interest in the real property at issue as a joint tenant with a right of survivorship. Act 2015-312 constitutes a major change in this area of law and is of particular note to practitioners in the area of family law. While the language of this new statute appears straightforward on its face, it remains to be seen how it will be interpreted by Alabama Courts. For this reason, the following practical suggestions are provided for the family law attorney: Obtain detailed information upon intake regarding non-probate assets held by your client; Obtain a copy of your client’s beneficiary designations for all non-probate assets for the client file; Advise your client regarding the effect of divorce on beneficiary designations for non-probate assets; Advise your client to update his/her beneficiary designations where allowed by law in order to ensure that the client’s beneficiary designations are in line with the client’s wishes; Encourage your client to discuss his/ her wishes with intended beneficiaries; Ensure that the disposition of all nonprobate assets is addressed as part of any settlement agreement or divorce decree; and Recommend that your client engage in professional tax, estate, and financial planning post-divorce in order to adequately address the client’s new situation. G (Endnotes) 1 A “governing instrument” is defined by this statute as “an instrument executed by the divorced individual before the divorce or annulment of his or her marriage to his or her former spouse.” Act 2015-312, Section 1(a)(4). Birmingham Bar Bulletin/ Winter 2015 21


Birmingham Bar Association Bulletin Winter 2015
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