Your ex-spouse may still be a beneficiary of your estate. Have you changed all of your beneficiary designations? – Whether it is for your retirement benefits or your life insurance, if you don’t remember to change your beneficiary forms when you get divorced your spouse will remain the beneficiary.
It goes without saying that it is important for your divorce lawyer to carefully craft a settlement agreement to submit to the court in your divorce case so that the agreement accurately reflects the intentions of you and your spouse. However, when it comes to your life insurance policies and employee benefits such as retirement plans, stock plans, and life insurance proceeds, while your lawyer may be able to include certain protective language in your agreement, it is up to you to ensure that your benefits are distributed properly. You can do this by contacting your benefit provider and filling out the requisite forms to change your designated beneficiary so that your ex-spouse is no longer listed as the person to receive the benefits in the event of your death. While the divorce is pending you are typically prohibited from doing this.
I have seen several cases where a party to a divorce passes away after the divorce without having remembered to change their designated benefit beneficiary forms. Unfortunately, due to a complicated set of Federal laws known as ERISA, in all likelihood the benefit company is going to distribute the deceased spouse’s benefit proceeds to the ex-spouse REGARDLESS OF WHAT THE DIVORCE SETTLEMENT AGREEMENT SAYS. Under Federal law, the benefit company is essentially only required to pay out any accrued benefits to whoever is named on the company’s forms, even if that person may have waived his or her right to the benefits in a divorce proceeding. After the benefits are distributed, the estate of the deceased spouse then has to sue the ex-spouse to claim the benefit proceeds under the divorce agreement.
If the attorney carefully worded the divorce agreement then Georgia law is clear that the ex-spouse must give the money back to the estate. However, because of the ERISA loophole there is the potential the ex-spouse will have the opportunity to spend all the money before the estate takes legal action, if the deceased spouse never got around to changing his or her beneficiary forms. Further, if the divorce agreement was not drafted properly – that is the agreement did not include an “explicit waiver of [a] party’s interest” – then there is always the chance the courts will rule in favor of the ex-spouse.
This entire headache can be avoided if you remember to change your beneficiary forms so that your benefit company knows exactly who you want your benefits paid to in the event of your death. As previously mentioned, this is one aspect of the divorce process that your attorney cannot handle for you. If you do not know who to put as your beneficiary, contact a trust and estate planning attorney who can advise you or some alternate options.