When going through a divorce, there are a myriad of issues to finalize, including property division, child custody, alimony payments and child support. One of the most overlooked issues, however, may be that of updating beneficiary forms and other important financial documents. Many people become so involved in negotiating other terms of the settlement that they often forget how crucial it is that these documents get revised to reflect new beneficiaries. Failing to update these forms may mean that the ex-spouse receives the benefits in the case a death should occur.
Financial and divorce experts weigh in on the importance of revising beneficiary forms after or before filing for divorce. In one case, a man’s former wife was left on a valuable life insurance policy. Although the ex-wife could have easily received all the benefits from the life insurance policy, the state’s supreme court ruled that her name should have been removed from the policy when the divorce occurred, and the money was given to the contingent beneficiaries. The divorce automatically removed her name from the policy, even though the policy holder failed to do that in a formal fashion. When the court made this ruling, they first looked at factors, including the policyholder’s intent, as well as what he or she would have expected when they signed the contract.
People who are going through a divorce can easily become overwhelmed with the process. They may want to discuss matters with a knowledgeable family law attorney to ensure they take care everything.
Source: Financial Planning, “Is an ex-spouse entitled to an IRA after divorce?” Ed Slott, Aug. 15, 2018.