Divorce is never an easy process, not even for the person who initiated it. While you might want to get over the process as soon as possible, it is not uncommon to overlook changing your beneficiary designations after divorce.

Contrary to what you may have thought, the divorce decree does not automatically change the beneficiary designations of your life. Unfortunately, that means the responsibility is yours, and you must update your beneficiary designation immediately after your divorce has been finalized. 

In that case, you’ll need to get in touch with your insurance companies, the administrator of your retirement accounts, and the bank or brokerage firm that holds your bank or brokerage account and ask for a change of beneficiary form.

It is easy to forget to change your beneficiary after an intense divorce, only to have your assets and retirement account go to your ex in the event of death.

Your will is not enough

Disinheriting your ex-spouse through your will might seem like a great move, but it’s not enough. That’s because beneficiary designations overthrow what’s in your will. What this means is that you must designate a new beneficiary for each plan or policy where they are named,

It is essential to know the laws in your state and its stance regarding beneficiary designations since they differ from state to state.

However, there are exceptions where a divorce decree requires that an ex-spouse be maintained as a beneficiary. Failing to change your beneficiary can result in the courts determining who gets your benefits.

You can designate any beneficiary of your choosing, whether your children, a family, or a friend unless the divorce decree mandates a specific beneficiary. There have been court battles because people will say, “I’d like my IRA to be divided equally among my children,” while one of these children is not named as a beneficiary in the IRA records. 

In the eyes of the account custodian and even the law, the designation of the IRA trumps any other directive.

Consider a customized designation

Most IRA plan documents allow for default beneficiary options. For example, if you listed two individuals as a beneficiary and one predeceases you, the share belonging to the deceased beneficiary goes to the surviving beneficiary.

With a customized designation, you can choose how that portion would be distributed instead of having it default to the surviving beneficiary. For example, if one of your beneficiaries has children, those children will receive the primary beneficiary’s share if they pass before you.

When drafting your customized beneficiary designations, there are various options you need to explore to determine the one that meets your needs. It is even best to work with an expert to ensure you don’t make mistakes. Feel free to call us or book an appointment by filling out our contact form.