CDA Estate Planning & Post-Divorce Financial Transition Flashcards
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Read the first 6 CDA Estate Planning & Post-Divorce Financial Transition flashcards as text
After a divorce is finalized, what is the most critical estate planning action a client should take immediately?
Answer: Update all beneficiary designations on retirement accounts, life insurance, and financial accounts
Beneficiary designations supersede a will, so failing to update them after divorce can result in an ex-spouse receiving account assets.
In many U.S. states, what happens to testamentary provisions in a will that name an ex-spouse after divorce is finalized?
Answer: Many states automatically revoke bequests to an ex-spouse by statute upon divorce
Many states have 'revocation upon divorce' statutes that automatically void will provisions benefiting an ex-spouse after the divorce is finalized.
Why do beneficiary designations on retirement accounts and life insurance policies override a divorce decree?
Answer: Because ERISA and insurance contract law make beneficiary designations contractual obligations that supersede court orders
Beneficiary designations are governed by plan documents and insurance contracts, which are contractual arrangements that pass assets outside of probate and outside the reach of a divorce decree.
A client named their ex-spouse as primary beneficiary on a $500,000 life insurance policy and died before updating it. What is the likely outcome?
Answer: The ex-spouse would likely receive the proceeds because the beneficiary designation controls
Without a state revocation-on-divorce statute covering insurance contracts, the named beneficiary — the ex-spouse — would typically receive the proceeds.
What is a 'transfer on death' (TOD) or 'payable on death' (POD) designation and why must it be updated after divorce?
Answer: A designation on financial and brokerage accounts that passes assets directly to named beneficiaries outside of probate
TOD/POD designations pass financial account assets directly to the named beneficiary and must be updated after divorce just like life insurance and retirement accounts.
Which legal document gives someone authority to make financial decisions on your behalf if you become incapacitated, and why must it be updated after divorce?
Answer: A durable power of attorney, which grants financial decision-making authority and must be updated to remove an ex-spouse
A durable power of attorney must be updated after divorce to prevent an ex-spouse from retaining authority over your financial affairs if you become incapacitated.