Getting divorced is never easy. Splitting your finances, possessions, and even the custody of your children can be a tedious and grueling process that will leave you emotionally drained. During the hustle and bustle of this transition period, long-term obligations like life insurance often go unnoticed, which can reopen old wounds down the road without proper planning.
When you apply for a life insurance policy, you designate your beneficiaries (the person or people who will receive the payout of a policy when you die) up front before the policy even goes into effect. This means that if something happens down the line that causes the owner of a policy to not want their initial beneficiary to receive their death benefit, it’ll still go to the beneficiary they chose during their application unless they take action to edit the policy.
Normally, changing the beneficiaries of a life insurance policy is fairly simple – it’s just a matter of getting in touch with the insurance carrier and submitting a quick form with your new beneficiary details. With a little help from your agent or customer service representatives with the carrier, you can submit a request for a beneficiary change and have it take effect within a few days.
However, divorce throws a few legal wrinkles into the process, especially during hearings.
During the Divorce Process
The primary factor that complicates the beneficiary change process is the Temporary Restraining Orders that are put into place as soon as the petition for divorce is filed. These Temporary Restraining Orders are placed on both spouses in order to protect the rights of both parties and mitigate the possibility of one spouse bamboozling the other and leaving them with nothing.
TROs lock down and prevent a lot of shady actions that jilted spouses might try during a divorce, including:
- Packing up the kids and moving to another state overnight
- Cleaning out joint bank accounts
- Cancelling home or auto insurance policies
- Taking out loans using jointly-held assets or collateral
- Removing funds from one partner’s retirement account
- Breaking headlights, slashing tires, etc. etc.
Life insurance payouts are restricted by TROs specifically because they limit the ability of spouses to edit the future payout or beneficiaries of their insurance policies to try and cut the other spouse out during their divorce hearings.
These orders are in place for situations where the couple will still be financially invested in each other even after divorce, such as a couple with a child splitting up. In that situation, one parent will most likely be the primary guardian. If the insured parent isn’t the primary caretaker but will be paying child support throughout the child’s life, the parent who was slated to receive the payout of the policy may very likely have a case to keep the benefits of a policy. After all, if the insured parent dies, the child support payments would also stop and place an increased financial burden on the surviving parent.
Even in situations where the divorcees won’t be financially invested in one another, during divorce hearings, it is likely that the policy owner will need to either get direct consent from the spouse being removed from the policy or a ruling in their favor in order to make a beneficiary change during the proceedings. It’s pretty likely that if the policyholder’s ability to alter a policy is ruled against in divorce court, they’ll be unable to change the beneficiaries of their policy in the future without a legal challenge.
After the Divorce Process
After the divorce is finalized, and if no restrictions have been placed on where the face amount of the policy can go, the policy owner can change the beneficiaries of their policy normally by submitting a beneficiary change form to their insurance carrier.
Most experts recommend submitting the paperwork for a beneficiary change immediately after the divorce is finalized, barring any limitations and restrictions placed during the hearings. This is crucial, because when policyholders intend, but never actually got around to requesting a beneficiary change to take a former spouse off of the policy, that creates legal wiggle room for the former spouse to make a claim on the policy and start an unwanted legal dispute after the death of the insured.
Long story short, divorce is hard. Luckily, if the split is relatively amicable, you aren’t trying to be sneaky about it, and your spouse won’t rely on you financially following the divorce, it’s fairly easy to change the beneficiaries of a life insurance policy after the dust settles.
While there may be other, more pressing concerns to deal with after a divorce, taking a few minutes to tie up the loose ends in your postmortem support plan is a relatively painless way to relieve a few future headaches for your family and make sure that everyone gets what they deserve after you’re gone.
Photo Credit to: Bogdan Migulski