While there are a number of bureaucratic tasks and loose ends that must be addressed in the instance of divorce, many people do not realize that making adjustments to your named beneficiaries is one of the most important ones. This is because most couples have listed their spouse as their beneficiary for major accounts such as their 401(k), IRA, and life insurance policies and plans. Without making changes once you go through a divorce, your ex can still inherit all of the proceeds from those plans, even if you have adjusted other estate planning documents such as your will or trust.
Employee Retirement Income Security Act (ERISA)
Specifically, employer-based plans – such as your pension and 401(k) plan – are governed by the Employee Retirement Income Security Act (ERISA), meaning that federal law governs, and the beneficiary stays as is unless and until you change it. This means that – instead of going to your contingent beneficiary or your estate (or even your new spouse), they will go to your ex – if that’s who’s listed.
If you are getting a divorce, you and your attorney need to make sure that you complete all of the relevant beneficiary change forms in terms of insurance and investments. Once the divorce is finalized, then you can date and sign these forms and send them in. Still, you should always name contingent beneficiaries in order to protect yourself, as well as regular contact providers just to verify who your named and contingent beneficiaries are. You have nothing to lose by sending in a new beneficiary form for any non-ERISA accounts as well, just in case.
Who Should I Name Instead?
One question that we regularly receive as family law attorneys is whether people should declare their children to be the main beneficiaries of their life insurance, for example. In making this decision, keep in mind that anyone under the age of 18 cannot typically receive these benefits and, therefore, if you pass while your children are still minors, the provider could either hold onto the funds, turn them over to be managed by a designated trustee, or even allow your ex-spouse to manage the proceeds for the benefit of the children. Your attorney can help you figure out the best course of action here, and how these decisions impact (and are impacted by) certain estate planning tools, such as your trust.
Contact Our South Carolina Family Law Attorneys
If you have any questions about obtaining a divorce here in South Carolina, contact our experienced family law attorneys today to find out how we can help. We can help you with a myriad of issues related to your divorce, including transitions involving important accounts and other issues, such as property division.