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Change In New York Law Cuts Off Designation Of Former Spouse As Beneficiary Of Assets On Death

MPMM Law - Thursday, July 31, 2008

Divorce or Annulment Now Revokes Any Revocable Disposition or Appointment of Property to a Former Spouse

Under former law a divorce did not revoke many revocable dispositions ( "testamentary substitutes"), such as lifetime revocable trusts (including Totten Trusts), life insurance policies, or joint tenancies (including joint bank accounts). Nor did a divorce revoke a power of attorney given to a former Spouse under provisions of the General Obligations Law.

But an important amendment to the law has changed all that. Existing Estates, Powers and Trusts Law (EPTL) 5-1.4 has been repealed and a new EPTL 5-1.4 has been enacted which provides that a divorce or annulment will now revoke any revocable disposition or appointment of property to a former Spouse, including a disposition or appointment by will, by beneficiary designation, or by revocable trust (including a bank account in trust form). It also revokes any revocable provision conferring a power of appointment on the former spouse and any revocable nomination of the former Spouse to serve in a fiduciary or representative capacity, such as nomination of the former Spouse as a personal representative, executor, trustee, guardian, agent, or attorney-in-fact.

A divorce would sever joint tenancies between former Spouses (including joint bank accounts) and transform them into tenancies in common. According to the Sponsor’s Memorandum the new statute does not change the New York case law concerning the effect of divorce on tenancies by the entirety. (See Kahn v Kahn, 43 NY2d 203 (1977); Anello v Anello, 22 AD2d 694 (1964)). Laws of 2008, Chapter 173, § 2, effective July 7, 2008.