Updating Your Information Post-Divorce

Divorce is often financially and emotionally challenging, and you likely already know that. What you may not know is how to protect yourself from financial disaster, which could happen long after your divorce is final.

What if an accident happens after your divorce and you pass away? You expected your children or another designated loved one to inherit your assets. Instead, your ex-spouse and their new partner got it all. It may sound like something that can’t happen, but it can and does when people don’t update their beneficiaries after their divorce is finalized.

You can’t depend on the courts to handle such a situation, either. In a Supreme Court case known as “Egelhoff v. Egelhoff,” for example, a husband did not change his beneficiary on his life insurance polices or retirement pensions. When he died, instead of going to his children from a previous marriage, his ex-wife received all those assets. Those children challenged what happened in court, but they lost.

Another Supreme Court case, known as “Hillman v. Maretta,” saw a divorced man forget to change the name of the beneficiary on his retirement account. When he died, that money went to his ex-wife instead of his current one, and this was upheld by the Supreme Court as well. The court took the position that his ex’s name on his retirement account took precedence over state property laws, so his current wife did not receive any of his retirement assets.

How to Protect Your Assets Post-Divorce

Unless your divorce decree designates beneficiaries, you must contact your HR department to change the name of the beneficiaries on any retirement accounts you have after the divorce. This includes 401k, 403b, 457, pension accounts and any deferred compensation, your health savings account, and any life insurance or disability insurance you have. If you are not certain what you need to address, speak to your HR rep and ask your divorce attorney.

Of course, you do not want to leave loved ones high and dry when it comes to your back accounts, either. Update your designated person to receive those funds in the event of your passing on your checking, saving and cash deposit accounts. If you have any transfer-on-death (TOD) accounts, be sure to switch the beneficiaries on those, too.

If you have any other retirement accounts, annuities or brokerage accounts, you’ll need to designate a new beneficiary on them. Contact your broker, dealers or financial advisors as soon as you can to make those changes.

In addition, change all your passwords for financial websites you use, update your emergency contacts, update your home insurance and auto insurance information, and change the beneficiaries on any private life insurance policies you have. Review all your financial paperwork carefully to ensure you don’t miss an account or other asset.

Revise Your Will or Trust

If you already have a will, it’s time to get an updated one. If you don’t have a will, it’s time to make one. The same applies to any trust you may have created, especially if that trust was created jointly with your now ex-spouse. Your family law attorney can help decide what you need to change to ensure your assets pass to the right people when you die.

Not updating your beneficiaries and estate planning documents when you experience a major life change like a divorce can be a serious mistake that will have consequences for your loved ones. As you go through your divorce and plan for your new life ahead, be sure to plan for what happens to your property after you pass, too.