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Why it’s important to update beneficiaries after divorce

On Behalf of | Jun 26, 2018 | Divorce

When people in Michigan decide to divorce, it can be particularly important for them to take action after the divorce to ensure that their life insurance policies and other important accounts are appropriately updated. Some people deal with matters like life insurance policies in the divorce decree, whereby a former spouse disclaims interest in a policy or account. However, after the holder of the policy or account owner passes away, the insurance company will give the funds to whoever the named beneficiary is on the account. Life insurance companies, pension funds and other companies do not automatically receive divorce decrees when they are filed. Therefore, these changes will not be made unless the newly divorced policy owner contacts the company to change the beneficiary.

When these changes are not made, it can lead to drawn-out legal battles and courtroom disputes. There have been a number of estates that have lost significant value as a large portion of the money in question has been spent on legal fees in order to determine the future of the funds. These types of disputes can be avoided in the future by including these changes as part of the divorce process.

In some cases, the matter has gone to court. In many of these cases, courts have found in favor of the challengers when the divorce decree, issued in court, officially recognized the beneficiary change, ruling that it trumps the private contract with the insurer. However, when the matter is not addressed in the divorce decree, the beneficiary designation controls how funds are disbursed after death.

There are a number of important issues to be dealt with during a divorce, including those that go beyond the divorce decree itself. A family law attorney can assist divorcing individuals with protecting their assets and their futures by changing their estate plans to reflect the changes in their lives.

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