Common Financial Mistakes Following Divorce #2

Failing to change the beneficiary designations after a divorce or separation can have devastating consequences.  Did you know that the beneficiary designation you list on certain assets such as your insurance policies or your pension plan will take precedence over your will or trust?  Even if your Divorce Decree indicates that you have the right to change the designation, or even if your former spouse waives an interest in your policy that might not be enough, if you do not also change the beneficiary designation. 

Consider the case of Redd v. Brooke, 96 Nev 9, 604 P.2d 360 (1980).  In this case a Husband and Wife divorced, their decree provided that each would assume ownership of any life insurance policies held on their own life.  Husband subsequently died without changing the beneficiary designation of his policy. The Court found that absent unequivocal language in the Decree to remove the ex-wife as a beneficiary under the policy, the ex-wife was still entitled to all of the proceeds from the policy, as Husband had the ability to change the designation but had failed to do so.  Therefore the presumption was that he still intended his ex-wife to benefit from the policy.

One of the biggest misstates people make is forgetting to update their beneficiary designations when they get married, divorced, have children or grandchildren, or when one of their designated beneficiaries passes away.  Any time you have major life changes, make sure you update your beneficiary designations as well.  You can update your beneficiary designations at any time by contacting the company who administers your policy or plan.  Generally, the company will require you to submit your request in writing, and they may require that you use their special form.  There should not be any cost to you to make this change.  Additionally, consider an annual check up with your financial planner or estate planning attorney, so that they can ensure your plan still mets your needs.

Consider the case of Redd v. Brooke, 96 Nev 9, 604 P.2d 360 (1980).  In this case a Husband and Wife divorced, their decree provided that each would assume ownership of any life insurance policies held on their own life.  Husband subsequently died without changing the beneficiary designation of his policy. The Court found that absent unequivocal language in the Decree to remove the ex-wife as a beneficiary under the policy, the ex-wife was still entitled to all of the proceeds from the policy, as Husband had the ability to change the designation but had failed to do so.  Therefore the presumption was that he still intended his ex-wife to benefit from the policy.

One of the biggest misstates people make is forgetting to update their beneficiary designations when they get married, divorced, have children or grandchildren, or when one of their designated beneficiaries passes away.  Any time you have major life changes, make sure you update your beneficiary designations as well.  You can update your beneficiary designations at any time by contacting the company who administers your policy or plan.  Generally, the company will require you to submit your request in writing, and they may require that you use their special form.  There should not be any cost to you to make this change.  Additionally, consider an annual check up with your financial planner or estate planning attorney, so that they can ensure your plan still mets your needs.