If you have ever been involved in a divorce, you are most surely aware of the tense situations that often arise. The divorcing parties sometimes place the blame for breakups on one another in an attempt to gain some favor in the eyes of the judge determining the outcome of the case. Whether due to property division, child custody, or spousal support payments, there are many reasons to attempt to “win” in divorce proceedings. One aspect of divorce that is often overlooked is the changes to life insurance policies. Whether court-ordered or simply a spiteful act, individuals may or may not like the idea of their ex-spouse receiving benefits from a life insurance policy upon their death.
Imagine a situation where a couple has been married for a handful of years, has taken out life insurance policies naming each other as the beneficiary and is now facing a divorce. Years after the divorce is final, both individuals have moved on to new relationships and have separate families with new spouses and children. Unless a change is made to the original life insurance policy documentation, the ex-spouse would still be stated as the beneficiary of the original plan. As you might imagine, this payout situation would likely not go over smoothly with the new spouse if their deceased spouse’s life insurance policy paid out to their ex, instead of them. This beneficiary situation may be made even more awkward if children from the second marriage exist and were dependent on the policy paying out.
In some circumstances, a judge overseeing a divorce may order a divorcing spouse to keep certain parties listed as the beneficiaries for a life insurance policy. This can be due to a number of factors, but usually stems from children of the marriage existing that would rely on such a payout. In the event that a spouse ignores the court order and changes the beneficiary information, the other party may still be able to rely on the court order to claim the policy payout in the future.
In certain jurisdictions, ex-spouses may be cut off from life insurance benefits automatically. It is not safe to rely on this alone, but to explore all of the factors involved with your situation. During a divorce proceeding, it is best to consult your attorney and the court to better understand your rights and obligations involving life insurance following a divorce. In order to make sure your interests are aligned with the current and future status of your life insurance policy, there are certain steps to take following a divorce. As previously mentioned, be sure to check with the appropriate individuals involved in any divorce proceedings to see where your life insurance policy stands. Unless court-ordered or agreed to by the parties, you will want to contact your insurance provider to see if you have options regarding a change in beneficiaries on your policy.
Your policy provider should be able inform you whether your original beneficiary declaration was revocable or irrevocable. If the declaration was revocable, you should now be able to make the appropriate changes to the policy to name new beneficiaries as you see fit.
Call for a free consultation.