By Merri Rudd, appeared August 25, 2005, Albuquerque Journal, Business Outlook
Reprinted with permission

• Editor's note: This column may not be quoted or reproduced in whole or part without express written permission of the author.
  
  Q: In your column in Business Outlook on July 14, 2005, you stated that an ex-spouse is excluded from inheriting as a payable on death (POD), transfer on death (TOD), and life insurance beneficiary. Can they inherit under these designations if the designation is dated after the divorce is final? Anonymous
  
  Good point! The column you mentioned stated that while "revocation by divorce" is the general rule, some people want to include an ex-spouse in a will. If so, people should update their wills after a divorce to include the ex-spouse as a devisee in spite of the divorce. This same principle applies to beneficiary accounts, such as the ones you list.
  
  New Mexico's law only nullifies provisions to ex-spouses in governing instruments "executed by the divorced individual before the divorce or annulment of his marriage to his former spouse." If you want to name your ex-spouse as a beneficiary of an IRA, POD account, TOD account, or life insurance policy, just be certain to update the beneficiary designations after the date of the divorce. Designations created after the date of the divorce should be honored upon your death.

  Q: All my financial accounts are POD and home TOD to my two daughters. The one daughter will be my personal representative. How is she to pay my last expenses when I die-cremation, any utility bills, etc.? V.M., Albuquerque, NM
  
  I addressed this issue several years ago, but it is important enough to review now. New Mexico's Uniform Probate Code states, "If other assets of the estate are insufficient, a transfer resulting from a right of survivorship or POD designation…is not effective against the estate of a deceased party to the extent needed to pay claims against the estate and statutory allowances to the surviving spouse and children." The law governing transfer on death deeds for real property contains nearly identical language.
  
  The transfer on death (TOD) law for stocks and security accounts also considers creditors' rights. The TOD laws do "not limit the rights of creditors of security owners against beneficiaries and other transferees under other laws of this state."
  
  This means that POD and TOD account recipients are liable for a decedent's debts if there are no other funds to pay them. By law the recipient beneficiaries must account to the decedent's personal representative. The personal representative has the power to start a court proceeding to recover the funds once he or she receives a written demand for payment from a surviving spouse, creditor, or child of the decedent. This proceeding must be started within one year after a decedent's death.
  
  Most of the time, the personal representative does not have to bring a legal action to recover funds distributed to beneficiaries. The recipients usually agree informally and voluntarily to share equally the costs of the decedent's debts from either the funds they claim at the bank or brokerage house or their own funds. Also, if the debts are small, creditors may decide not to collect from POD or other assets.
  
  In your example, I hope that your two daughters will agree informally to pay your final expenses by contributing equal amounts from the POD accounts that they collect upon your death or from their own funds. If so, settling your estate should not require a court probate proceeding.
  

  
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