by Linda Suzzanne
Griffin
A recent
case arising out of Texas (this is relevant . . . stay with me)
Brenda Gray v. Maria Gloria Nash, NO. 2-07-351-CV Court
of Appeals of Texas, Second District, Fort Worth, 2008 Texas is
another example of what NOT to do if you want to omit your ex spouse
as a beneficiary. Decedent, Brent Nash divorced Brenda in
1997, and as part of the divorce decree he was required to give her
child support and to make her the beneficiary of a life insurance
policy with a death benefit of at least $60,000. In 1997 Mr. Nash
purchased a $500,000 life insurance policy and designated his
daughter, Amanda, as the beneficiary. In 1998 Brent married Gloria
and in June 1998 submitted a change of beneficiary form, $60,000 to
Brenda and the balance to Gloria. No change of beneficiary
designation was made after July of 2001.
In July,
2001 the divorce court determined that Brent was current in all child
support obligations and terminated all child support. Mr. Nash died
on October 14, 2006, and Gloria submitted the death certificate and
payment for the full $500,000 death benefit. Brenda argued she was
entitled to the policy proceeds of $60,000 because she was the
designated beneficiary. Gloria argued that Brenda was not entitled
because the July 20, 2001 court order terminated Brenda’s rights
and that Brenda had no insurable interest in Mr. Nash’s life.
Under
Texas law Brenda was entitled to the $60,000 as a matter of contract
law. Gloria also argued under Texas law a PRE-decree
designation of ex-spouse as a beneficiary of life insurance is not
effective unless the decree provides for a redesignation after the
decree is entered. The statute did not apply as the designation
occurred after the divorce. Further, the court determined the
insurable interest arose at the time the policy was obtained and
continued at all times after the designation.
Advice:
Be sure
that after divorce all beneficiary designations are carefully
reviewed. Further, a new insurable interest statute has passed in
Fla. Stat. §627.404. The insurable interest need not exist
after the inception date of coverage.
Safeguarding
IRAs
As
everyone is aware, economic times are not good. (The understatement
of the year!) If you have an individual retirement account (“IRA”)
at a bank, you may be concerned about the stability of those
deposits. Currently, retirement accounts are federally insured up to
$250,000 per bank. This limit applies to banks, savings associations
insured by the FDIC, as well as credit unions insured by the National
Credit Union Administration. It applies to traditional and Roth
IRAs, SEP IRAs and Simple IRAs. All of your retirement accounts at
the same insured bank are added together and insured up to $250,000.
Retirement accounts are separately insured from any other deposits
you may have at an institution. For example, you can also have a
bank account of $50,000 in your own name, a CD of $100,000 with your
spouse’s name and IRA accounts with $250,000. Each of the accounts
(other than the IRA) would be insured up to $100,000. Be careful if
you move funds from bank to bank. Remember that trustee to trustee
transfers are safe, but if you receive the distribution, you have 60
days to roll over your funds into the IRA, and if you have done a
rollover within the last 12 months, you must wait 12 months before
you can do another rollover for the same IRA. If you violate the
12-month rule, you will owe income tax plus a 10% penalty if you are
under the age of 59½ AND the funds are no longer IRA funds.
A new
FDIC rule was issued September 25, 2008. A trust owner with up to
five different beneficiaries at one FDIC institution is insured up to
$100,000 per beneficiary. A trust owner with more than $500,000 and
more than five different beneficiaries will be insured for the
greater of $500,000 or the aggregate amount of all the beneficiaries’
interest in the trust, limited to $100,000 per beneficiary.
Advice:
Remember to actually
look to see where your funds are located and review the FDIC limits.
Are
You Dealing With A Home Foreclosure?
The
Florida Bar has implemented the “Florida Attorneys Saving Homes”,
otherwise known as the “Flash” Program which provides free
assistance to distressed homeowners.
Advice:
If you
are in this unfortunate situation then contact the Flash Program at
1.866.607.2187 to see if they can help and discuss this
situation with your CPA.
All
Contents © Copyright Linda Suzzanne Griffin,
P.A.
