Going through a divorce in Houston involves untangling countless aspects of a shared life. You divide property, update bank accounts and establish new routines. But in the midst of these immediate changes, it is dangerously easy to forget about your estate plan. You might assume your will is void, or you might not think about it at all.
This leads to a critical question: If something happens to you, could your ex-spouse still inherit your property?
The answer for your will
In Texas, the law provides a helpful, automatic safeguard regarding your will. When your divorce is final, the Texas Estates Code dictates that any provisions in your will that name your former spouse as a beneficiary are automatically voided. The same rule applies to any appointment naming them as your executor or trustee.
Essentially, the law treats your ex-spouse as if they had passed away before you. The assets designated for them would instead pass to the alternate beneficiary named in your will or, if none is named, according to state intestacy laws.
The critical exception: Federal law (ERISA)
Many people assume this protection stops at the will, but Texas law also automatically voids many non-probate beneficiary designations upon divorce. For example, the Texas Family Code makes a beneficiary designation for an ex-spouse on a life insurance policy “not effective.” The same is for retirement plans like IRAs and other financial plans.
However, a major pitfall exists for assets governed by federal law, not state law. The federal Employee Retirement Income Security Act (ERISA) governs most employer-sponsored plans, such as 401(k)s and many employer-provided life insurance policies.
This federal law often overrides state law. In many cases, ERISA dictates that the plan administrator must pay out to the beneficiary listed on the plan’s documents, regardless of a state-level divorce decree or law. If you named your spouse as the beneficiary on your 401(k) and never updated it after the divorce, your ex-spouse could still receive the entire account.
Why you must update your entire estate plan
A divorce is a major life event that should always trigger a complete review of your estate planning documents. Relying on the automatic voiding rules is risky. The cleanest and safest approach is to create a new will that reflects your new wishes.
More importantly, you must personally contact every financial institution, insurance company and retirement plan administrator to formally update your beneficiary designation forms. This is the only way to ensure you protect your assets and distribute them to the people you now intend to benefit.