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Monday, July 28, 2008

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

Under former EPTL 5-1.4, a disposition in a will to a former spouse was revoked by a divorce or annulment unless the will expressly provides otherwise. In addition, a divorce revokes a revocable disposition of securities under the "Transfer-on-Death Security Registration Act" (see EPTL 5-1.4(c)) and, under case law, transforms a tenancy by the entirety into a tenancy in common.Under EPTL 5-1.4, a divorce revokes a will provision nominating a former spouse as executor or trustee; and under provisions of the Public Health Law, divorce revokes a Health Care Proxy given to a former Spouse (NY Public Health Law §2985) or, under recently enacted Public Health Law §4201, a former Spouse's power to dispose of a decedent's "remains." However, a divorce did not revoke many other revocable dispositions ( "testamentary substitutes"), such as lifetime revocable trusts (including Totten Trusts), life insurance policies, or joint tenancies (including joint bank accounts). A divorce did not revoke a power of attorney given to a former Spouse under provisions of the General Obligations Law. Laws of 2008, Chapter 173 repeals EPTL 5-1.4 and a new EPTL 5-1.4 is added which provides that a divorce or annulment will 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)).New EPTL 5-1.4 continues the rules of former EPTL 5-1.4 which provide that the provisions of the governing instrument are given effect as if the former spouse predeceased the divorced individual, and that a revoked disposition, appointment, provision or nomination is revived by the divorced individual's remarriage to the former spouse. It protects a payor, such as a bank in connection with a joint account, or a life insurance company in connection with a life insurance policy, where the payor has made a payment to a beneficiary designated in the governing instrument after the divorce has taken place, unless and until the payor has received written notice of the divorce. Even after such written notice is received, the payor can still receive protection and a complete discharge of liability by making the payment to the court.EPTL 5-1.4 is effective July 7, 2008 and applies only where the marriage of a person executing a disposition, appointment, provision or nomination in a governing instrument, as defined in EPTL 5-1.4(f)(5), to or for the benefit of a former spouse ends in a divorce or annulment, as defined in EPTL 5-1.4(f)(2), on or after such effective date or, where such a marriage ends prior to such effective date, only where such a disposition, appointment, provision or nomination takes effect only at the death of the person who executes it and such person dies on or after the effective date. Laws of 2008, Chapter 173, § 2, effective July 7, 2008.