The controlling documents determining who gets the life insurance & retirement funds are the designated beneficiary forms. It’s extraordinarily important to update your designated beneficiary forms after a divorce, but many people miss this important step.
Often divorce is a very emotional and trying time. Some may even compare it to the death of a loved one. After all, it is the end of a relationship. There are so many issues to deal with in either of these situations. It can be difficult to keep a clear mind during these times. And even more difficult to realize all of the legal and financial aspects involved in a divorce.
Why Should I Update my Beneficiary Forms?
After a divorce, your beneficiary update is not an automatic process. This is something you will have to do. These can be the beneficiaries of life insurance policies or retirement plans. Usually, spouses have set each other as their beneficiaries while married. So, if this was the case for you, then it would still be the case after your divorce.
Updating your designated beneficiary forms is a very easy step to overlook, especially if your divorce was long-winded. You most likely want to put the whole ordeal behind you. However, It is extremely important to complete this process immediately after your divorce. This way, if anything were to happen to you, your ex-spouse would not receive your assets. These balances would instead go to the correct individual/s of your choice, such as a new spouse or any children you may have.
What About my Will and Estate Plan?
Estate plans are usually re-written in the case of a remarriage. If you change your Will to say that all assets go to the new spouse and/or kids, you’re good to go, correct? No! The controlling documents that determine who gets the life insurance and retirement funds are the designated beneficiary forms. Regardless of what the Will says or what your intentions were. If you forget to change these, either because you didn’t know or you figured there is plenty of time, your current and ex-spouse will be surprised at who inherits a portion of your estate assets.
For example, say your retirement accounts are worth $1,000,000 and you have another $1,000,000 life insurance policy when you die. Your Will says that everything goes to your current spouse, but the designated beneficiary forms still show your ex-spouse as the sole beneficiary. Imagine your current spouse’s disbelief when they try to collect on the life insurance balance or ask for a withdrawal from the retirement account, only to find that they are not entitled to either.
A review of your designated beneficiary forms is always a good idea to make sure they align with your current estate plan. It’s extremely important in case of remarriage, either as a result of divorce or the death of a spouse.
Need Help With Your Beneficiary Forms?
We have been assisting our clients in updating designated beneficiary forms after divorce for over 20 years. Our CPAs will take the time to understand you and your specific needs. We serve Raleigh, Durham, Cary, Apex, Garner, Wake Forest, Wilson, and surrounding areas. Call us today (919) 493-2603 or fill out the form below to schedule a consultation.