Life insurance is one of the most important ways you can provide for your family. However, it’s important to make sure you update beneficiary information. If you aren’t careful, someone that you’d rather not benefit from your policy — like your ex — will receive the money.
The Supreme Court recently heard a case that involved a former federal employee’s life insurance policy. The beneficiary on the policy was his ex-wife; he never changed the information after his divorce, nor did he change it after his remarriage.
The widow in the case challenged the payout, since the law in Virginia (where the couple lived) protects against such situations. However, the life insurance policy was a federal benefit, so the Supreme Court ruled that the state law didn’t apply. Now, the ex-wife will receive the life insurance benefit instead of the widow.
[Check Your Credit: Don’t Guess. Know.® Get your free credit report and score. No credit card required.
What can you learn from this? In many cases, the beneficiary you have listed on your accounts is the one who receives the payout. This is true of a number of accounts, from tax-advantaged retirement accounts to life insurance policies. The listed beneficiary trumps even what you have written in a will.
As you prepare your assets, it’s important to review your beneficiary information. Even though some states offer protection so that an ex doesn’t receive preference over a current spouse, you don’t want to rely on that flimsy protection. Your best bet is to make sure that your accounts and policies list your beneficiary of choice.
In many cases, there are certain forms to fill out in order to designate a new beneficiary. Make sure you find out the proper procedure. Anytime you experience a major life event, check all of your accounts to confirm the beneficiary information, and make changes as needed.