Post-divorce mistakes and how to avoid them (Part 3)

By Jennifer M. Paine

Attorney, Cordell & Cordell, P.C., Detroit office

Note: This is Part 3 of a four-part series on the top 10 mistakes made after a divorce and how to avoid them. Click here to read Part 1, click here to read Part 2 and click here to read Part 4.

In most states, once parties have negotiated and entered into a settlement agreement that the divorce court then incorporates into a decree, the court cannot modify the agreement absent fraud, duress or mutual mistake. So, what can you do to avoid 10 common mistakes made post-divorce? Here are some suggestions.

Mistake #5: You Thought The Economy Would Be Great

In today’s economy, this may be a less common mistake. However, be sure a glimmer of hope (a pay raise, a new job) that the economy is on the up does not give you a false sense of security. This was Frank’s problem in the adaptation from Marshall v Marshall. Do not count on maintaining your current income, or earning more, when you negotiate a support or property settlement payment schedule. To the extent the laws in your jurisdiction allow, build in automatic support review periods and/or make your payments conditional on another event, with a floor and a ceiling to the payments (e.g., you pay one-third of the money you receive for the sale of X, to a maximum of $Y and a minimum of $Z). Do not agree to non-modifiable, fixed support unless you are absolutely certain (and that is rare) you will have the income to pay it. Do not waive support, even if you gawk now at the thought of your spouse paying it. If your payments include interest, consider whether a variable interest rate tied to some external indicator is better than a fixed rate. If your settlement contains conditional payments (e.g., you pay your spouse one-half your home’s equity only if you sell the home in ten years), clarify whether the payee is entitled to an alternate award if the condition fails. Prepare a budget for your first post-divorce year to determine whether you will have an income sufficient to meet all of your personal and court-ordered expenses. If not, what can you trim? Most of all, have a financial advisor review your settlement before you finalize it and apprise you of any beneficial planning techniques.


Mistake #6: Your Spouse Is Still Your Beneficiary

State law treatment of beneficiaries for life insurance, annuities and endowments vary. In Michigan, unless the parties’ judgment of divorce provides otherwise, the judgment terminates each spouse’s interest as a beneficiary in the other’s life insurance policies, endowments and annuities. See MCL 552.101. This is true, in Michigan, even if the federal Employee Retirement Income Security Act of 1974 (ERISA) preempts state law with respect to determining beneficiaries because it does not preempt a nonparticipant interest waiver. See, e.g., Sweebe v Sweebe, 474 Mich 151; 712 NW2d 708 (2006). This is not true in all states, and you should not rely upon it even if it is true in your state because the laws in this area change. The best way to ensure your ex-spouse is no longer a beneficiary for your life insurance, endowment or annuity is to contact your insurance, endowment or annuity administrator and execute new beneficiary designations. A certified copy of your decree is helpful but not necessary unless you have limited rights to modify your beneficiary designations. Be sure to contact the administrator before you finalize your settlement agreement and your decree to learn whether the administrator will require any special language in either or documents from your spouse to effectuate the change.


Mistake #7: Your Estate Plan Is Old, Or You Do Not Have One

Divorce is also the time to review your estate plan. Who do you want to administer your affairs when you pass away? Who will receive the property you leave? Who should oversee your funeral and burial services and any expenses thereto? Who do you want to make your important medical decisions in the event you are unable? Discuss these issues with your attorney to learn what effect divorce has on your estate plan. Some attorneys are even willing to redraft or prepare your estate plan at a reduced rate as part of your divorce file.

Note: This is Part 3 of a four-part series on the top 10 mistakes made after a divorce and how to avoid them. Click here to read Part 1, click hereto read Part 2 and click here to read Part 4.


Jennifer M. Paine is an Associate Attorney in the Detroit, Michigan office of Cordell & Cordell P.C. She is licensed to practice in Michigan, and has been admitted pro hac vice in Illinois, Ohio, and the United States Court of Federal Claims. Ms. Paine received her BA in English and Mathematics from Albion College and graduated Summa Cum Laude. She received her Juris Doctorate from MSU College of Law and graduated Summa Cum Laude.

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