Friday, May 17, 2013
Divorces involving older clients (gray divorces) are on the rise. A few important points to consider following a gray divorce include how to divide the retirement account and what to change concerning the estate plan.
Pension plans can be divided using a Qualified Domestic Relation Order (QDRO). A Separate Interest QDRO divides a pension plan by setting aside one spouse’s share, in essence treating the non-participant spouse as if he or she had also been an employee. It is important to note if the retirement plan is already in pay status, because most plans won’t allow a separate interest if participants are already collecting from the plan.
A Shared Interest QDRO bases the pension share of the non-participant spouse on the life expectancy of the participant spouse. Again, it is important to note the pay status of the retirement plan, because “most shared interest plans will not allow the participant spouse to name a survivor beneficiary if one was not named upon retirement, nor can the participant spouse cancel a survivor benefit if one was provided for when the plan went into pay status.”
Under the Massachusetts Uniform Probate Code, divorce will revoke wills, life insurance, trusts, and bequests to relatives of an ex-spouse. But following a divorce, the best practice is to go ahead and update the will as well as the durable powers of attorney and heath care proxies.
See Andrea Dunbar, Gray Divorce: Retirement Accounts and Estate Planning, Massachusetts Divorce Law Monitor, May 13, 2013.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.