Who Are Your Beneficiaries After Your Divorce?

After a person goes through a divorce in Texas, they should have a task list of matters that must be handled soon after the divorce is completed.  Some are obvious, such as removing a spouse from bank accounts, changing names on deeds or titles, or perhaps even changing their own name immediately after the divorce.  An often forgotten task that should be on that list, however, is changing the beneficiaries on various insurance policies, retirement accounts and bank accounts.

Many newly divorced people (and sometimes even their attorneys) mistakenly rely on Texas law to protect them in this circumstance.  Someone might tell you, “It’s okay – Texas law prohibits your ex-spouse from being a beneficiary unless you re-designate them on the policy.”  That statement, however, doesn’t tell the whole story.

Section 9.301 and 9.302 of the Texas Family Code describes the effect of divorce on a life insurance policy (9.301) or a retirement or other financial plan (9.302) in the event the ex-spouse is a beneficiary.  In a nutshell, the designation is no longer effective unless you re-designate the spouse, if the spouse is a beneficiary under the divorce decree, or unless they are named as a trustee or beneficiary of a trust to which the benefits are to be paid.

Keep in mind, however, that unless the insurance company or plan administrator is advised of the divorce before benefits are paid out, your family could lose out on the ability to go after the insurance company or plan administrator for wrongfully recognizing the old beneficiary designation.  Sure, you could still go after the recipient of the funds, but that could be a much more difficult task than going after the company handling the policy or fund.

What is the lesson to be learned from this post?  First and foremost, a divorced spouse needs to review all of their retirement, insurance and other financial plans to ensure they know who the beneficiaries are and to change those beneficiaries to reflect who they wish to ultimately benefit from those plans in their event of their death.  If, however, that is not done in a timely manner, the alternate beneficiaries or the divorced spouse’s heirs need to notify the insurance company or plan administrators as soon as possible after the death of the divorced spouse in order to invoke the protections provided under the Texas Family Code.

To find out more about the effect of divorce on your insurance policy, retirement plan or other financial matters, contact our Houston divorce attorney, Bobby L. Warren, at 713-579-9702.

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