Tomas and Angie were married for 12 years. Their marriage came to an end when Angie filed for divorce in 2011. Six months after the filing, the divorce was finalized. Eight months after that, Angie died from a heart attack and the proceeds from her $100,000 term life insurance policy were distributed to Tomas. Likely this was not Angie’s intention.
While your beneficiary choices seemed obvious and rock-solid when you initially made them — likely while you were married and your ex-spouse or a joint trust were the default beneficiaries — things obviously change after a divorce. Imagine if you pass and the proceeds from your IRA or a life insurance policy go to your ex-spouse and not your children or some other individual you intended? Angie never did.
Naming a beneficiary also helps to keep your assets out of probate when you pass away. Beneficiary designations commonly take priority over bequests made in a will or living trust. For example, if you long ago named a son or daughter who is now estranged from you as the beneficiary of your life insurance policy, he or she is in line to receive the death benefit, regardless of what your will or truststates.
Speaking of a will and trust, after a divorce these documents take on an even bigger sense of urgency. And the fact is that most married and divorced individuals put this off due to the perceived cost and difficulty. Nothing could be further from the truth or cost your estate, loved ones and children more money and grief.
Bottom line, anyone who is single and has assets titled in their sole name should consider a trust. And once divorced, all assets will likely be titled in your sole name.
As a newly divorced individual, you can easily see why dealing with these issues is critical, especially where minor children are involved. The cost, time and effort required are well worth the money saved and the peace of mind delivered to your family and heirs after your passing. Finally, if there was a will and/or trust in place during the marriage, make sure that your divorce decree contains specific language rescinding these documents.
Don’t assume, don’t guess, don’t leave it to chance. Make sure your assets are set to transfer to the people or institutions you intend. Although it’s a great idea to review beneficiary designations annually, it becomes paramount to do so right after a divorce is finalized.
Carlos Blanco founded Matters of Divorce www.mattersofdivorce.com to provide answers, referrals and support to people considering divorce or who recently have been divorced. He may be contacted by calling 305-908-1171 or sending email to cblanco@mattersofdivorce.com.
