What Happens to Your Assets When You Die After Divorce?
By Katie Lin Daly
When a divorce is finalized, most people are focused on moving forward — not necessarily on what happens to their assets when they die. But divorce can have significant implications for your estate, your beneficiaries, and who ultimately receives your assets.
In Pennsylvania, the piece of paper granting a divorce (the Divorce Decree) used to be very simple. The Decree would state:
The date of the Decree;
The parties' names; and
That those parties were now divorced.
In cases involving financial claims, the Decree might also reference an agreement or court order resolving those claims.
In 2023, the language in the Decree changed. Pennsylvania Divorce Decrees issued after March of that year now include the following:
The parties shall reaffirm or change the beneficiary status on any life insurance policies, annuity contracts, pensions, profit sharing plans, or other contractual arrangements providing for payment to a spouse if it is the intention of one of the parties to keep or change the other party as a beneficiary. Failure to do so may result in revocation of the beneficiary designation pursuant to 20 Pa.C.S. § 6111.2 (Effect of Divorce or Pending Divorce on Designation of Beneficiaries).
You might read that and think, what does this mean for me? And why does it matter after my divorce is final?
Let's do a divorce attorney's crash course on what happens to your assets after death.
Probate Assets: A probate asset is an asset that is controlled by a will or estate plan. If there's no will or estate plan, then it's controlled by intestacy laws.
Let's say I have a bank account that only I own, with no designated beneficiary. If I leave that account to my spouse in my estate plan, my spouse can receive it through the administration of my estate.
If I have no estate plan or will, my spouse can receive a percentage of my estate, potentially including that bank account, depending on who else survives me. (Intestacy laws are nuanced and go beyond this crash course.)
Non-Probate Assets: A non-probate asset is property that is governed by the title of the asset, a contract, or by operation of law. In other words, it doesn't follow the will.
Think about the beneficiary designation on a life insurance policy or retirement plan. If I have a will that leaves everything to my spouse, but the beneficiary designation on my life insurance policy is my brother — sorry spouse, brother gets that money.
Generally, these assets pass upon death without the need for litigation or administration of the estate.
Now that we understand the two types of assets, let's put ourselves in an admittedly morbid scenario:
You and your spouse were married;
During the marriage, you and your spouse earned exactly the same amount and saved exactly the same amount in separately titled accounts;
When you got to the financial resolution of the divorce, you agreed in writing that everyone would keep what's theirs and move on;
During the marriage, you had a will that left 100% of your assets to your spouse;
During the marriage, the beneficiary designation on your retirement account (your only non-probate asset) was your spouse;
When you got divorced, your Decree referred back to your written agreement;
Then you die (I'm sorry).
Now let's apply what we've learned.
Had you not divorced, it's relatively simple. Because you had a will giving your spouse everything, they receive all of the probate assets. And because your spouse is the beneficiary of the retirement account, they receive that, too. Easy peasy.
But you're divorced — so what now?
Let's first look at our Decree and that language I cited earlier. In this field, we generally assume that when people get divorced, they probably don't want their now-former spouse to receive any more assets.
The Pennsylvania law cited in the Decree generally provides that, after a divorce, certain beneficiary designations naming a former spouse become ineffective. So in our example, although the now-former spouse is listed as the beneficiary of the retirement account, that designation may no longer be effective.
But what if you still want your former spouse to receive the account? Maybe you have children together, and you want the money to go where it can be used for the kids. Maybe you really dislike your family and don't want them to get anything. Maybe you're still friends with your former spouse, and the marriage didn't work out for other reasons.
We can fix that!
In cases like those I just listed, the owner of a non-probate asset could (while they're still alive):
Update the designation to show that they still wish their former spouse to receive the asset regardless of marital status, if the account servicer allows;
Provide a court order that shows that the former spouse would still receive the asset;
Provide a written contract that shows that the former spouse would still receive the asset;
Update the designation after the date of the divorce, showing that they still wish the former spouse to receive the asset.
That's why the language in the Divorce Decree is helpful! It's a good reminder that divorce can affect who receives your assets after death. If you still want your former spouse to receive certain assets, you may need to take action. And regardless of your intentions, it's important to review your beneficiary designations, since different rules can apply to different types of accounts.
How about the probate assets?
For similar reasons, if a divorce is finalized (or grounds for divorce have been established) after the signing of a will, provisions in that will benefiting or relating to a former spouse generally become ineffective, unless the will indicates that those provisions were intended to survive the divorce (20 Pa.C.S. § 2507(2)).
So even though your former spouse is the person who would receive assets under your will, the divorce generally changes that. And if your former spouse is named as the executor of your will — whether they would receive anything under it or not? Same story. The divorce generally makes that appointment ineffective.
But what if you want your former spouse to receive assets under your will? Or you want your former spouse to remain as executor?
Similar to the rules for non-probate assets, the original will might include language stating that you wish your former spouse to receive assets regardless of marital status. Or you could sign a new will after the Divorce Decree to make your intentions clear.
Here's your takeaway:
Once your divorce is finalized, do your homework to close all the loops.
Beyond just the final Decree, look at any agreements or court orders you may have with your former spouse to determine what steps you need to take. For example, an agreement might require a life insurance policy to secure alimony or child support payments, meaning your former spouse may need to remain a beneficiary.
If you have a will that provides for your former spouse, review it and update it accordingly. (And if you wish to provide for someone new who doesn't have a legal relationship to you, make sure your will reflects that, too!)
If you have non-probate assets with beneficiary designations, review and update them as needed!
And if you're not yet divorced? Consider how your financial agreements could affect your estate and beneficiaries down the road.
The law makes generalizations about what people might want after a divorce and after their death, and those generalizations don't fit everyone. You don't have to let the default decide what happens to your assets and your estate when you're no longer around to decide.
Do you have questions about how divorce may affect your estate or another family law matter? Contact one of our family law attorneys to learn how we can help. Call us today at 215.362.2474.