Life insurance policies have specific language in them to minimize the risk that the funds end up in the wrong hands. If you file for divorce, you can most often change the terms of your life insurance policy. However, there may be limitations to doing this. State laws can differ. Making the change may be easy in some situations. In others, it can be a matter of the court being a part of the decision.
When You File Divorce, Update Your Information
Once you file for divorce, update your legal ownership for many of your assets and contracts. With life insurance, you may need to change the beneficiary. This is the person that will obtain the death benefit. The death benefit is the payment sent if you die while the policy is in place. After divorce, consider the following:
- Do you still wish for your soon-to-be ex to be the beneficiary? This may be beneficial if he or she will care for your child.
- Do you wish to put the death benefit into a trust for your kids? If so, you will need to name a person to manage the trust.
- Do you have someone else you would like to receive the death benefit? List this person on your policy as your beneficiary.
Most life insurance policies can have changes from time to time. This is because they are a revocable policy. You carry them at your own discretion.
What About Legal Matters?
Filing for divorce is a legal process. During it, the court will divide assets in a fair manner. Many factors play a role here. In some situations, the divorce decree will state the ex-spouse cannot claim a person’s death benefit. However, there are limitations here. The judge may order the policy liquidated to help split the value of the estate. This is not common, though. Be sure to tell the court of your life insurance policy. If you are both on it, you may need to change the policy to reflect the court’s orders.
What is most important to remember is that you need to make a change. Contact your life insurance agent. Inform that individual of the divorce. Then, make alterations to the life insurance policy. Remove your soon-to-be ex. Add in someone else to receive the death benefit. Speak to a financial counselor about the best options for your situations and for managing your funds. Your insurance agent can help you change your coverage to your satisfaction. If you have questions or need more information about coverage, one of our agents is ready to help, call Loftis & Wetzel at 800-725-3434.