Last week, the United States Supreme Court issued a ruling on a case involving life insurance beneficiary designations after divorce. Mark Sveen had named his wife as the beneficiary of his life insurance policy. They got divorced, but Mr. Sveen did not update the beneficiary. Court ruled that divorce invalidated the beneficiary designation in favor of the ex-wife, and that the proceeds should be paid to the children of the decedent, upholding the current Minnesota law on the subject.
This case highlights the importance of updating beneficiary designations after divorce. Texas law voids your ex-spouse as a beneficiary on your financial assets, including life insurance policies, once your divorce is final. However, if you have a retirement plan or life insurance policy through your employer, ERISA likely controls what happens upon divorce. ERISA says the beneficiary designation stays as it is.
Because you cannot change the beneficiary on ERISA controlled assets from your spouse, you will have to act quickly after divorce to update these beneficiary designations. And, if you want to name your minor children as the beneficiary, work with an experienced estate planning attorney to make sure you have a trust set up for them since minors cannot inherit assets outright, and naming them as beneficiaries could result in a costly and time consuming legal process for your family.
Nielsen Law PLLC provides family focused estate planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information and to learn about our firm, please contact us.