The “Ex-Spouse” Trap: Why Your Will Isn’t Enough

Our friends at DP Legal Solutions discuss how when you go through a divorce, your life changes, but your paperwork often doesn’t. Many clients at our firm assume that a final divorce decree or a standard Will is enough to update their estate plan. Unfortunately, when it comes to retirement assets, that assumption can be a costly mistake. A wills lawyer can help ensure your beneficiary designations are properly updated and aligned with your current intentions. Contact an experienced lawyer today to ensure your beneficiary designations actually reflect your current life and protect your intended heirs.

The Federal vs. State Law Divide

One of the most confusing aspects of estate planning is that different assets are governed by different sets of laws. For employer-sponsored plans like 401(k)s, federal law (ERISA) generally trumps state laws. This is known as “preemption”. Even if your state has a “revoke on divorce” statute—which technically cancels a former spouse’s rights to inherit—federal law may ignore it.

The Landmark Case of Egelhoff v. Egelhoff

The U.S. Supreme Court case Egelhoff v. Egelhoff serves as a stark warning. In this case, a man designated his wife as the beneficiary of his employer-provided pension and life insurance. Shortly after they divorced, he died without a Will. His children from a previous marriage sued to recover the benefits, citing a Washington state law that automatically revokes a spouse’s beneficiary status upon divorce. However, the Supreme Court ruled that because the plan was governed by ERISA, the state law was preempted. The ex-spouse received 100% of the money simply because her name was still on the form.

The IRA Difference and Current Solutions

IRAs are different because they are typically governed by state law rather than federal ERISA law. This means that in many states, your IRA might be protected by “revoke on divorce” laws, but you should never rely on that as a safety net.

Another recent case from 2024 involved a man who named a girlfriend as his 401(k) beneficiary in 1987. They broke up in 1989, but he never changed the form. When he died in 2015, the account had $750,000 in it. Despite his brothers suing for the funds, the court ruled the decades-old designation still controlled the distribution.

An experienced lawyer can help you perform a comprehensive audit of your beneficiary forms. Don’t leave your legacy to a decades-old piece of paper or a legal technicality.