After Divorce, Follow Through in Changing Beneficiaries

Divorce brings about so many life-changing adjustments that it can be easy to overlook certain follow-up details that should be addressed as soon as possible. One such item is changing the beneficiaries on important documents such as employment benefits, life insurance policies, IRAs, and other retirement accounts, as well as redoing your will.

This tends to be one of those things that people intend to get to soon, but so often it gets put off. Unfortunately, once a person is dead, it is too late. A beneficiary cannot be changed from the grave.

Many divorce agreements specify who the beneficiaries are to be for a specific period of time. Once the agreement becomes a judgment, it must be followed. If the Court’s ruling does not specify who you must name as a beneficiary, you have some discretion, but you still must take care of choosing your beneficiary in a timely manner.

The two scenarios below were actual cases I had that illustrate what can happen if this important matter is not addressed.

Former Spouse Takes Over Child’s Assets
Years ago, the relative of a former divorce client of mine contacted me. I learned that my client had unfortunately met with an untimely death while she still had an underage child. The problem was that this mother had never named a beneficiary on her life insurance policy or employment benefits. When she died, her child by definition of law became her beneficiary, but because the child was still underage, s/he could not yet collect the money. The surviving parent (and the mother’s former spouse) became the child’s legal guardian and therefore was now able to manage all the inherited assets. This is not what the mother had wanted at all, but unfortunately there was nothing that could be done that point, since she was no longer alive to make the necessary beneficiary changes.

Former Spouse Cancels Life Insurance Policy
In another instance, the family of a man who had recently died came to me to help probate his estate. Although I had not handled his divorce, he had been divorced years earlier and the family needed some assistance with divorce-related matters. His divorce agreement had required him to take out a life insurance policy of a certain amount as a guarantee for alimony, and to name his former wife as the beneficiary. The man followed through with the requirement, even providing proof to his wife that it had been done. But unbeknownst to her or anyone else, he later cancelled the policy. Nobody discovered what he had done until after he had died. Unfortunately, at that point there was no way to reverse the situation, and the wife had to pursue legal recourse against the Estate.

Protect Your Loved Ones
The primary reason to make sure you change beneficiaries after a divorce is to be sure you are in compliance with the Court’s requirements. But secondarily, if you are allowed some discretion as to who you name as a beneficiary, it is very important to protect your loved ones by making sure your assets will go to the one(s) you want to receive them, and are managed by those you trust. Whether you need to update your will, change a name on a retirement account, or designate a new recipient on your life insurance policy, do not put off taking care of this vital task. It could make all the difference for your children or other loved ones after you are gone.