Revocation On Divorce Statute: Who are the Relatives?

Take-Away: Like many other states, Michigan adopted the Uniform Probate Code in large part, and in particular its model provision that provides for the automatic revocation of a divorced spouse’s beneficial interest under a deceased former spouse’s ‘governing instrument.’ That automatic revocation includes not only the former spouse, but any provisions that are made for the former spouse’s relatives under the governing instrument. But each state’s statute varies as to who qualifies as a relative of the former spouse, thus making assumptions about who is, or who no longer is, a beneficiary under the governing instrument problematic.

Background: We have covered in the recent past Michigan’s statute that automatically disinherits a former spouse, either as a beneficiary of a former deceased spouse’s Will or trust, or where they are named as a beneficiary under a TOD, POD, or IRA contractual-like arrangement, or for life insurance, but which disinheritance also includes the former spouse’s relatives. Michigan’s statute provides:

• Disinheritance Statute: Except as provided by the express terms of a governing instrument, court order, or contract relating to the division of the marital estate made between the divorced individuals before or after the marriage, divorce, or annulment, the divorce or annulment of a marriage does all of the following: (a) Revokes all of the following that are revocable: (i) A disposition or appointment of property made by a divorced individual to his or her former spouse in a governing instrument and a disposition or appointment created by law or in a governing instrument to a relative of the divorce individual’s former spouse; (ii) A provision in a governing instrument conferring a general or non-general power of appointment on the divorced individual’s former spouse or on a relative of the divorced individual’s former spouse; (iii) A nomination in a governing instrument, nominating a divorced individual’s former spouse or a relative of the divorced individual’s spouse to serve in a fiduciary or representative capacity, including, but not limited to, a personal representative, executor, funeral representative, trustee, conservator, agent or guardian. [MCL 700.2807(1)(a).]
• Relatives: The terms Relative of the divorced individual’s former spouse is defined as: “as an individual who is related to the divorced individual’s former spouse by blood, adoption or affinity and who, after the divorce or annulment, is not related to the divorced individual by blood, adoption or affinity. [MCL 700.2806(e).] As such, the parents of the divorced spouse, and children of the now-divorced spouse who are not the children of the decedent, and other relatives of the former spouse are automatically removed from the decedent’s governing instrument.
• Affinity: Unclear, at least to me, is what is intended by the use of the word affinity- a fifth cousin removed? EPIC provides no definition.  Wikipedia [always a reliable source!] defines affinity as: “In addition to kinship by marriage, ‘affinity’ can sometimes also include kinship by adoption and step relationship. Under the law, such relatives by marriage are known as affines. More commonly they are known as in-laws or family-in-law, as affinity is signified by adding ‘in-law’ to a degree of kinship.” But the Merriam-Webster Dictionary defines affinity as “a relation between biological groups indicating a common origin.” Even less helpful is the Oxford Dictionary which notes “The distinction between kinship and affinity is not always clear-cut.”
• States Like Michigan: States that have adopted this UPC model provision, like Michigan, include: Alaska, Arizona, Colorado, Idaho, Maine, Massachusetts, Montana, North Carolina, New Jersey, Nebraska, New Mexico, North Dakota, South Dakota, and Utah.

Constitutionality of Statute:  As was reported last year, the U.S. Supreme Court in Sveen v. Melin, held that the retroactive application of this provision of the Uniform Probate Code that causes the automatic disinheritance of a former spouse under a governing instrument [in that case a life insurance policy issued in Minnesota], did not violate the ‘contracts clause’ of the U.S. Constitution. [Sveen v. Melin, No. 16-1432, 584 U.S.___ (2018).]

Other States Differ: But as noted previously, not all states have adopted this ‘standard’ UPC provision like Michigan, that disinherits a former spouse and all of the former spouse’s relatives.

• Not All Governing Instruments: Some states have adopted the UPC but modified the language to revoke only testamentary bequests [not all governing instruments] and only with regard to the decedent’s former spouse, but not the former spouse’s relatives. These states include: Hawaii, Minnesota, and South Carolina. Some states revoke only bequests to an ex-spouse. These states include: Indiana, Oregon, Virginia, West Virginia, and
• New York’s statute provides that a divorce will revoke dispositions to, and the fiduciary appointments of, a former spouse, but the effect of its revocation-on-divorce statute does not extend to relatives of the ex-spouse. The impact of this narrow statute was on full display in the New York decision In re Estate of Lewis, where the New York statute disqualified the decedent’s ex-husband from inheriting under her Will, or acting as the executor of her probate estate, but the ex-husband’s father was named as the successor beneficiary under the decedent’s Will and the successor executor of the probate estate, and he was not disqualified under the terms of the New York statute. Note that the disinherited ex-husband will probably be named as a beneficiary of his father’s estate so that, arguably, some day in the future, the ex-husband will ultimately receive the inheritance from his ex-wife’s estate, albeit indirectly, a result that the New York statute was designed to prohibit based upon the testator’s presumed intention to disinherit a former spouse. [In re Estate of Lewis, 25 N.Y.3d 456 (2015).]

Conclusion: While the Michigan statute automatically removes an ex-spouse and his/her relatives as beneficiaries under the decedent’s governing instrument, that statute will not cause the disinheritance of the former spouse, or their relatives, under a qualified plan like a 401(k) account that is governed by ERISA. The same goes for any group-term life insurance in place that is part of an employee welfare plan that also is governed by ERISA. Federal law preempts Michigan’s statute, or any other state’s revocation-on-divorce statute, and it provides that the named beneficiary governs, regardless of whether, or not, that named beneficiary is a former spouse. Nor will the Michigan automatic-revocation-on-divorce statute apply to an irrevocable trust, like an ILIT or SLAT where the spouse is named as lifetime beneficiary, unless that trust is drafted and uses a floating spouse concept, where the spouse is not named, just their capacity (as the spouse of the settlor, e.g. ‘my spouse’ or ‘the beneficiary’s spouse to whom he/she is legally married’) is used as the ‘placeholder.’ With all of the variations in state statutes that provide for the revocation of an inheritance on divorce, it is dangerous to assume that other states have as broadly phrased a revocation-on-divorce statute as Michigan’s, or worse, assume that Michigan’s statute applies to the transfer of wealth that is otherwise governed by ERISA’s federal law which preempts the state’s automatic disinheritance laws.