A marital settlement agreement (MSA) is a carefully negotiated document designed to resolve complex issues between spouses at the time of divorce. But what happens when one party dies before all the terms of that agreement are carried out? Understanding the enforceability of MSAs post-death is crucial—especially when the divorce involves a high-net-worth estate, business assets, or life insurance provisions.
This post explores the complexities of how MSAs are enforced after a party's death, with a particular focus on three high-risk areas: equitable distribution of a business, enforcement of death benefits, and conflicts between actual life insurance policy beneficiaries and MSA directives.
MSAs as Enforceable Contracts After Death
Once incorporated into a final judgment of dissolution of marriage, an MSA becomes more than a private contract—it becomes a court order. This distinction is critical. The death of one party does not render all obligations under the agreement moot. Florida law recognizes that certain provisions of MSAs, especially when they contain clear and unambiguous provisions, remain enforceable against the deceased party’s estate.
Florida courts have affirmed that obligations set forth in an MSA survived the death of a former spouse, and the estate was bound to fulfill them. Courts have enforced a property settlement agreement incorporated into a divorce decree, holding that the agreement's terms, including provisions binding successors and heirs, survived the obligor's death.
Equitable Distribution of a Business Interest After Death
One of the most contested issues in high-net-worth divorces is the equitable distribution of business interests. Suppose the MSA provides that Spouse A shall transfer 50% of a business interest to Spouse B, but Spouse A dies before effectuating that transfer. What happens next?
In these cases, the estate of the deceased spouse typically steps into their shoes. The court may enforce the transfer or, if that's not feasible, require the estate to compensate the surviving spouse for the agreed-upon share. Problems arise, however, when the MSA lacks specificity or fails to anticipate death before performance.
To avoid ambiguity, MSAs should include clear valuation dates and methodology, buy-sell provisions or alternative payout options, and language obligating the estate to comply with business-related transfers.
In practical terms, if the business interest cannot be divided due to third-party constraints or partnership agreements, a lump-sum equalization payment may be necessary. Integrating business succession planning with divorce settlement terms can prevent future litigation and create clarity for the parties as well as the executor of the estate.
Death Benefits in Marital Settlement Agreements
It is common for MSAs to require one party to maintain life insurance as a form of security for spousal or child support. The purpose is straightforward: ensure that financial obligations continue even after death. However, execution is often flawed.
Problems can arise when the required policy is never obtained, the named beneficiary is not updated to reflect the terms of the MSA, premiums lapse, or the policy amount is insufficient.
Even if the policy is in place, the surviving party may face resistance from the estate or new spouse, particularly when competing claims arise. Fortunately, courts in Florida have consistently found that contractual obligations in MSAs can be enforced against the estate.
The key to enforcement is specificity. An effective MSA should identify the life insurance policy by number or issuing company, state the required face amount and purpose of the policy, and designate an irrevocable beneficiary or trust to ensure compliance.
If these elements are met, a court may compel the estate to obtain equivalent coverage or pay out a commensurate amount from estate assets. For family law and estate attorneys alike, these provisions must be crystal clear and backed by documentation.
Conflicting Life Insurance Beneficiary Designations
A particularly contentious scenario arises when a life insurance policy's listed beneficiary conflicts with the terms of an MSA. For example, Spouse A agrees in the MSA to maintain Spouse B as the beneficiary of a $1 million policy, but later Spouse A names their new spouse instead. Upon Spouse A's death, the new spouse receives the benefit—but are they entitled to keep it?
Not necessarily. Florida courts have routinely upheld the principle that MSAs create enforceable contractual rights, even when the policy paperwork tells a different story. The doctrine of constructive trust is frequently applied to remedy such conflicts. Courts have held that the proceeds of a life insurance policy could be traced and redirected to the intended beneficiary when the decedent violated an MSA provision.
However, enforcement is not automatic. The intended beneficiary must take legal action to assert their rights. Courts will generally look for a clearly stated obligation in the MSA to maintain the ex-spouse as beneficiary, evidence that the policy existed and that the decedent had the ability to comply, and proof that the policy was improperly altered or maintained contrary to the agreement.
This is where meticulous drafting and diligent follow-through matter. It is crucial that you not only secure favorable terms in your MSA, but you also must ensure that all terms are reflected in all relevant documentation.
Future Proof Your MSA
Enforcing an MSA after the death of a party is often possible—but never simple. Success hinges on how well the agreement was drafted and whether post-divorce actions matched the stated obligations. For clients navigating high-net-worth divorces, it is vital to treat MSAs as living documents that must be integrated into all aspects of financial and estate planning.
When drafting an estate plan, collaborating with experienced family law counsel can help ensure that divorce-related obligations do not become overlooked liabilities. In our practice at Gladstone, Weissman, Hirschberg & Schneider, P.A., we routinely advise clients and fellow professionals on how to structure and enforce MSAs that remain durable through death and beyond.
If you're dealing with a potential enforcement issue or want to ensure that your MSA plans for the possibility of death prior to the completion of all obligations imposed by the MSA, Gladstone, Weissman, Hirschberg & Schneider, P.A. is here to help. Reach out to us for a confidential consultation.