A significant life event such as a marriage, birth or death are all reasons to review your estate plan. Separation or divorce can be another reason for an individual to review his or her will, trust or powers of attorney. However, an often overlooked aspect are the beneficiary designations on life insurance policies and retirement accounts.
While a married couple’s divorce will result in revocation of provisions in favor of the divorced spouse in a party’s will, the mere fact of separating or divorcing does not revoke the beneficiary designation in a life insurance policy of retirement plan. While there may instances during the separation process when the beneficiary designation cannot be changed for certain retirement plans because of federal law (usually employer-sponsored plans like 401(k)s), the moment your divorce is finalized is an appropriate time to get a beneficiary change form. Even if you have obtained your former spouse’s consent or agreement to release any rights he or she might have in your retirement account, until the beneficiary is changed, the plan administrator is obligated to follow the terms of the written contract and the beneficiary form.
The purpose of planning is to make sure your wishes are carried out. Imagine the surprise to a surviving family member if he or she learns that your retirement benefits, earned through your hard work are being paid to your former spouse because a single form changing the beneficiary designation isn’t completed.
If you have questions about the effects of a separation or divorce on your retirement benefits and how that can impact your estate plan, talk to an estate planning attorney sooner rather than later.