Remember to update your beneficiaries when you divorce

A recent Massachusetts case serves as yet another reminder that when you divorce, it’s important to review all your insurance policies, bank accounts, retirement funds and investment portfolios. It’s also important that you and your soon-to-be ex-spouse are each represented by separate counsel.

In this case a man took out a life insurance policy when he was still married to his ex-wife. He named his wife as its beneficiary. The couple got divorced after having two kids and handled their divorce pro se (without lawyers).

The husband died without ever replacing his ex-wife as the policy beneficiary. She sought to collect the benefits, contending that she and her ex-husband had made an oral agreement under which she would continue making premium payments in exchange for his promise not to cancel the policy and cash it out. She claimed they did this for the benefit of their children.

But the husband’s mother intervened, pointing out that Massachusetts has a “revocation upon divorce” law that cancels any “disposition or appointment of property” to a former spouse. The mother argued that this terminated the ex-wife’s beneficiary status, leaving her as the rightful recipient of the death benefit.

The ex-wife argued in court that because the Massachusetts law did not specifically state that it applies to “beneficiary designations” (unlike other states that adopted a similar law), the divorce did not strip her of her interest in the policy.

But a judge disagreed, pointing out that other parts of the law made it clear that beneficiary designations were meant to be revoked upon divorce, unless the owner of the policy stated otherwise in writing.

We will never know what the husband’s true wishes were. So if you want to make sure your assets go where you want them to in the event of your death, be sure to work with an attorney to identify any relevant documents, go through all beneficiary designations and make clear in writing what your intentions are.

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