After weeks or months of negotiation or litigation, you are finally nearing the end of the divorce process. You and your soon-to-be ex-spouse have developed—with or without the imposition of the court—arrangements for your children, your marital home, and for the general division of your marital property. Now, it would seem, all you need is the signed judgment for divorce, or divorce decree, and you can focus on your new, post-divorce reality. If you have life insurance or retirement investments, however, you probably still have some work to do.
The Role of a Beneficiary
When you purchase a life insurance policy, you are looking to provide a level of security for your family and loved ones in the event of your team. Thus, one of the most important provisions of any life insurance contract is the person or persons to whom the benefits will be paid. An intended recipient is called a beneficiary, and as the policyholder, it is up to you to select your beneficiaries. For those who are married, spouses and children are, by far, the most common beneficiary choices.
Likewise, investment accounts, such as retirement savings plans, 401(k)s, and others, also offer you the opportunity to select beneficiaries. This provides direction for the brokerage firm or the financial institution concerning who is to receive your investments after your death.
Challenges of Divorce
With divorce, obviously, comes the division of marital property, assets, and debts, which generally include life insurance policies and financial investments. Thus, dependent upon the circumstances of your marriage and divorce, you may be permitted to keep such accounts, with your ex-spouse no longer having any claim or interest in them. Other cases may require you to keep your former spouse as a beneficiary solely as a form of security for spousal maintenance or child support.
Assuming, however, that your divorce has given you unfettered control over your insurance policies and investments, it is important to remember that a divorce decree is not sufficient to effectively change your beneficiaries. The beneficiary selection paperwork for each account represents a part of a contract between you and the company and, as such, a change in your marital status will not automatically change your previously-designated beneficiaries. You designated an individual or group of individuals to receive benefits, and unless you change your designation, the company will honor that contract.
Simple Change Process
Fortunately, changing your beneficiaries is rarely difficult. Most changes can be done by completing a simple form, and in many situations, can even be completed on line. Some institutions may ask for a copy of your divorce to decree to process the change. By naming new beneficiaries, you can help prevent a potentially complicated—and sometimes ugly—situation for your surviving family after your death.
If you are considering a divorce, understanding the financial implications of the process is a critical step. Contact an experienced St. Charles divorce attorney at Bochte, Kuzniar & Navigato, P.C. to get the answers you need. Schedule your free consultation today by calling 630-377-7770.