August 29, 2023

Updating Your Beneficiaries After Divorce: 6 Essential Steps

Divorce can be an emotionally challenging process filled with many financial decisions.  One often overlooked aspect is updating your beneficiaries and estate plan.  These updates ensure the distribution of your assets according to your wishes.

I had a case I worked on a few years ago that resulted in my client receiving a large sum of money.  Her ex-husband passed away unexpectedly and hadn’t updated his beneficiaries.

These updates ensure the distribution of your assets according to your wishes.

  1. Create a list of all accounts. Make sure to include life insurance policies, 401Ks, and any other accounts you might not look at often.
    (Tip: you probably gathered this for your Case Information Statement (CIS), during the divorce process, if you did not keep a copy your divorce attorney should be able to provide it)
  2. Talk to your divorce attorney about the changes you want to make to ensure there are no legal requirements when updating your beneficiaries.
    (Tip: In making calls with my clients to the 401K providers I have found that most 401K plans need the ex to sign if you are not divorced, otherwise they will just need a copy of the divorce agreement.
  3. There is a form called Transfer on Death (TOD). Talk to your estate attorney before putting this in place until you can get your estate plan updated.  This form supersedes your will and allows you to change beneficiaries until you can update your estate plan.
  4. Contact all financial institutions and insurance companies to update your beneficiaries. Be sure to do this for each.
    (Tip: Most firms need name, date of birth, social security number, address, phone number and email address for each beneficiary.)
  5. Err on the side of caution and over communicate with your family and let them know about the changes that you made.
    (Tip: I have seen firsthand in working with families where clients with good intentioned estate plans leave certain beneficiaries feeling alienated so transparency can help prevent misunderstandings and future conflicts.
  6. The last step is to finalize your will and estate plan. This will help ensure fulfillment of your wishes and the protection for your loved ones.

Divorce is a significant life event that brings about many things in your life that require change.  It can be overwhelming, so take it one step at a time.  By taking the time to review and update beneficiaries and your estate plan you can have peace of mind that your wishes will be followed and will not end up in the situation that my clients ex-husband did.

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