Divorce or Remarriage? Time to Check Your Beneficiary Forms

By Beverly DeVeny, IRA Technical Expert
Follow Me on Twitter: @BevIRAEdSlott

Divorce or Remarriage? Time to Check Your Beneficiary Forms

• An ex-spouse can inherit assets if they are still named on the beneficiary form
• A current spouse can inherit employer plan assets, even if they are not named on the beneficiary form
• It is time to update your beneficiary forms

I am not an expert on divorce or remarriage. I have been married almost 50 years. But I do know that after either a divorce or a remarriage, it is time to check your beneficiary forms. How do I know that? I see the court cases when it all goes wrong.

What assets have beneficiary forms? Generally retirement assets, insurance policies, and annuity contracts

What laws affect assets with beneficiary forms? Generally federal law (ERISA) will govern employer plan assets, both retirement funds and life insurance, and state law will govern other assets with beneficiary forms. Some states have laws that automatically disinherit divorced spouses.

IRA Beneficiary Forms – You can change IRA beneficiaries anytime you want. In most states a divorced spouse named as your IRA beneficiary will inherit your IRA. If you do not want this to happen – change your beneficiary now!

Employer Retirement Plans and Life Insurance – Courts have consistently ruled that the beneficiary named for the retirement plan or life insurance policy is who will inherit that asset; unless…you have remarried. Under ERISA, a current spouse has certain rights to your plan benefits – no matter who is named on the beneficiary form. What this means is that if you want your employer plan benefits to go to your children but you have since remarried, your benefits are going to your current spouse. To avoid that, you will need to get a spousal waiver from your current spouse and file it with your employer before your benefits can go to your children. To make sure your employer plan assets go to the beneficiaries you choose – check your beneficiary forms now!

Insurance Policies and Annuity Contracts – Generally, the beneficiary named on the policy or the contract is the individual who will inherit the proceeds at your death. If an ex-spouse is named, that is who will inherit the money. If you do not want this to happen – change your beneficiary now!

Contingent Beneficiaries – Don’t forget to name contingent beneficiaries. They are your back-up plan. If the primary beneficiary dies before you do, the asset will automatically go to the contingent beneficiary. The primary beneficiary can also disclaim the asset, and the asset will then go to the contingent beneficiary. You should always have contingent beneficiaries named on all your beneficiary forms.