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Roll with the Changes After a Divorce…Including Beneficiary Designations

Reminder“What happens if you don’t make changes?”

While you don’t plan ahead for a divorce, you should immediately take steps to ensure your interests are protected and your estate plan reflects your new marital status if your marriage ends.

What should you change? Forbes’ article, “The First Thing You Must Do When Your Divorce Is Final,” says, in a word: “Everything.”

Once your divorce is final—that is, the divorce decree has been approved by a judge—and a judgment rendered, you should begin to review and revise, if necessary, the following legal and estate planning documents:

  • Trusts
  • Powers of Attorney (property, healthcare, HIPAA, etc.)
  • Your will
  • Life insurance policies
  • Retirement accounts

Let’s say your ex-spouse is the beneficiary of your life insurance policy and you die.

Guess what!

The proceeds are going to go straight to your ex-spouse and not your children. It doesn’t matter if your estate planning documents stipulate that the proceeds should go to your children. Still, if the plan all along was to keep the ex as beneficiary, you’re fine. Otherwise, the kids get zero.

What happens if you don’t even have a valid will in place? The divorce cuts the ex-spouse out as a legal heir, and that person won’t be in line to receive anything from your estate—but they still get the insurance proceeds if you don’t make the beneficiary change.

One final thought: when you make changes to estate planning documents, be certain that the changes are in accordance with the terms of your divorce decree. The divorce judgment is legally binding, and if you agreed that your ex-spouse would remain the beneficiary of a life insurance policy as a part of your divorce, you can’t change the beneficiary designation on the policy.

If you do, you’ll create a significant headache for your heirs if you pass away while the policy is in force.

Reference: Forbes (August 14, 2016) “The First Thing You Must Do When Your Divorce Is Final”

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