Why You MUST Change Your Life Insurance Beneficiary When Getting Divorced
Certified Divorce Financial Analyst™, Michelle Ash has a must-read article about financial issues after divorce in womensdivorce.com. Here’s an overview:
The divorce is finally over, the decisions have been made, and now life proceeds anew for the client. But it’s never really that easy, is it? For the newly-divorced client, the legal work may be done, but there’s often a long list of financial clean-up that lies ahead.
As a life insurance broker, I pay special attention when experts offer advice on how to avoid troubles with your policy. Michelle points to a big one regarding the need to change the beneficiary designation when the divorce is finalized:
According to estate planning attorney C. Randolph Coleman of The Coleman Law Firm, “There usually are a half dozen cases during a typical year where someone will call and ask whether there is anything they can do to avoid the ex-spouse of their recently deceased spouse, parent, child or sibling, from taking the life insurance or retirement plan that the ex-spouse was still the beneficiary designated on the decedent’s plans/policies. The short answer, there is nothing you can do. The beneficiary designation will trump the will or intestacy every time.”
Again from estate planning attorney, C. Randolph Coleman, “I probably see about 6 or 8 people a year who typically come in for estate planning 4 to 5 years after a divorce to ‘finally get around’ to updating their estate planning. Usually, during the course of our discussions I will suggest to them that they go back to their employer and check on the beneficiary designations for their life insurance and retirement plans. Invariably, about half of them will call back and tell me how much they appreciate the counsel to check because their ex-spouse remained their beneficiary.”
A big takeaway
One take away from the story is this: if you wait for a life event to prompt an update of your policy, you may end up doing too little too late. This problem can be avoided if you get into the practice of conducting regular audits of your policy. Policy audits can frequently head off trouble at the pass. To learn more, read here.
What about your policy?
What about your life insurance policy? Is the beneficiary designation is current?
Please feel free to comment, or to contact me directly with a specific question.