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Six Important Beneficiary Designations to Review if Getting Divorced
When you are in the process of divorcing and after your divorce is finalized, there are important steps to take to not only protect your financial assets and but also your emotional well-being.
During a divorce, you can update your estate plan with an interim will. For many couples, their spouse is their heir and designated beneficiary on most of their accounts. While you cannot change how community property may be divided, you may be able to direct sole and separate assets. The person who is named as the personal representative or executor of your estate should be reviewed and possibly changed. Medical or healthcare power of attorneys can be revoked and new powers can name someone other than your estranged spouse. This is critical in the event of a health catastrophe during your divorce.
Conversely, beneficiary designations on certain accounts cannot be changed until the divorce is finalized. It is important to change beneficiary designations immediately once the decree is entered. The divorce decree does not automatically change the beneficiary designations of your life insurance, retirement assets, health savings accounts or bank accounts.
It is highly likely that a former spouse was a named beneficiary on an account. If post-divorce something tragically happened to you and the beneficiary designation wasn't changed, your ex-spouse could receive life insurance proceeds, your retirement account balance or even the balance in your bank account.
What types of accounts or assets should be reviewed and possibly changed:
· Retirement accounts including 401(k) or IRA accounts: If not subject to a QDRO or a specific beneficiary mandate in the divorce decree, beneficiary designations can be changed on retirement accounts. While these may be changed on-line, it is best practices to change beneficiary designation in hard form and send to the custodian of the account. Contact the HR department at your workplace or former workplace or the administrator of your retirement accounts to obtain the necessary forms.
· Bank and brokerage accounts. Again, unless the decree specifies a named beneficiary, contact the bank or brokerage firm that holds the account and request a change of beneficiary form. If it was a joint account, best practice is to close the account and open a new account - with a designated beneficiary - just in your name.
· Health Savings account. These are frequently overlooked. Contact either your employer's HR department or financial institution that holds the account to obtain the necessary forms.
· Life Insurance. Contact the insurance carrier to obtain the forms and your employer's HR department if it a group life insurance policy.
· Power of attorney: In addition to a healthcare power of attorney, you may have signed a durable power of attorney. Those should be reviewed and potentially revoked if powers were given to a former spouse.
· Motor Vehicle Titles: In Arizona, a motor vehicle can be owned solely by one person. A beneficiary can be designated using ADOT's Beneficiary Designation for Vehicle Title Transfer on Death rather than needing to have title held jointly. All vehicle titles should be reviewed after the divorce decree is finalized.
It is best practice to return the beneficiary designation forms and to follow-up to ensure that each company not only received your change of beneficiary form but also has made the requested change. While some companies provide on-line access to change beneficiaries they may also require a hard paper copy of your beneficiary designation to have it be effective.
About the Author: Carissa Seidl is a family law attorney at the Phoenix law firm of Jaburg Wilk Her representation of family law clients focuses on divorce, child custody and post-decree modifications. She is experienced in high conflict dissolutions and can be reached at 602.248.1000.