“How would like to give your ex your life savings? Over your dead body, right?” You might be surprised how often people forget to review documents such as life insurance policies. Here's some very important tips to prevent your ex getting your life savings.
Do you want your ex-spouse to inherit any part of your estate? It could happen if you initially signed up for a retirement plan or life insurance policy when you were married to your ex-spouse. Chances are good that you designated your spouse at the time as the beneficiary. Now that you are divorced (and possibly remarried), you need to revisit your beneficiary designations and overall estate planning.
ABC 15 Arizona’s recent post, “Beneficiary designation: Don't set it and forget it or your ex could end up with your life savings,” explains that under the Employee Retirement Income Security Act (ERISA), plan administrators must legally disburse the money to the person on the form—even if it’s an ex-spouse. This even overrides provisions to the contrary in your Will. This mistake can create a real probate nightmare for loved ones—a mistake that’s really hard to correct after the fact.
Review all of your assets and to whom you intend to give them at your death whenever there’s a major life event like a birth, adoption, death, marriage or divorce. This quick check-up may save those you leave behind a lot of hard feelings, trouble and expense.
While you’re at it, here are several other things to consider:
- Rather than listing a young adult as a beneficiary, ask an estate planning attorney about drafting a trust to detail exactly how you want the money to be disbursed.
- Do not designate a minor as a beneficiary because life insurance policies won't pay minors directly. Consider a “testamentary trust” under your Will or a similar inheritance trust under your living trust.
- Remember you need to list a contingent beneficiary: if the primary beneficiary dies before you, you need a backup.
- Want to list someone other than your spouse as the beneficiary on a 401(k) plan? Unless your spouse agrees, by law, you are not allowed to do this.
- Failing to do estate planning creates ambiguity and means more headaches and fees for your family.
A qualified estate planning attorney can help you navigate all of the ins and outs of estate planning, giving you peace of mind and letting those you leave behind know that you cared enough to tackle these matters.
Reference: ABC 15 Arizona (July 17, 2016) “Beneficiary designation: Don't set it and forget it or your ex could end up with your life savings”