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CHAPTER 18 n KEEP YOUR PLAN CURRENT
Change in committed relationships. Providing for your spouse or partner is covered extensively in Chapter 4. Keep in mind that if you get divorced or split up, you should not procrastinate about changing your plan. This applies not only to your will or living trust, but also to assets that pass outside of probate (Chapter 2), such as retirement assets, life insurance and savings bonds, as well as jointly titled bank accounts, brokerage accounts and real estate.
In some states, the law provides recourse if you forget to change the pa- perwork – say, for your life insurance or IRA – when you get married. But even where this fallback exists, your spouse may wind up with less than he would have received if you had changed the forms to make him the beneiciary.
Divorce poses special complications, especially with respect to jointly held accounts and retirement assets. The non-employee spouse generally has a right to half the retirement assets acquired during marriage. But deter- mining what’s marital property and what’s separate property can be tricky.
Witness the battle over ownership of the Los Angeles Dodgers, which became an issue in 2010 during the divorce proceedings of Jamie and Frank McCourt. He said she had signed a postnuptial agreement six years earlier, ceding any ownership rights in the team (reportedly a strategy to protect this valuable asset from creditors’ claims). She argued in court papers that she didn’t realize she was signing away her rights. There was speculation that she wanted to continue as co-owner in order to secure an interest in the team for the couple’s four sons.
A court ruled that their agreement was invalid. Of the six copies the couple had signed, three listed the team as Frank’s separate property (California is a community property state) and three did not (seemingly a lawyer’s error). This made their intent unclear, the court found. The battle went into extra innings before they ultimately settled.
Another issue to consider is the inheritance rights spouses may have once they are separated but not yet divorced. That became a gossip item after Elizabeth Edwards, wife of the philandering former Senator John Ed- wards, died in 2010. Elizabeth’s will, signed about a week before she died, did not mention John, from whom she was separated. At the time of her death, the couple was waiting out the one-year period before they could get a divorce. And during that time, under the law of North Carolina, their home state, John had the right to inherit one-third of what she left behind, regardless of what her will or living trust said.
This conlict, which could have been averted by a postnuptial agree- ment, might trip up other couples. However, it has not posed a practical
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