Changing the beneficiary of a life insurance policy following a divorce

Divorce changes the beneficiary of a life insurance policy. The confusion of divorce settlements between parties can have profound financial implications that most couples commonly misunderstand. Understanding the changes necessary for the beneficiary of a policy ensures that both sides make the best choices in identifying the replacement beneficiary. This is based on the new needs and future obligations with considerations of the new relationship-bonds replacing marital benefits.

Changes in the beneficiary of a life insurance policy

Federal law and the majority of state statutes presume an identity change of the beneficiary of the life insurance policy upon completion of a divorce process. The legal doctrine follows a two-fold rationale to justify the changes. First, to retain the party’s accrued benefits on the policy and ensured they enjoy the liberty to determine the beneficiary on their terms. The new changes are legally binding and transferable to the identified beneficiary in full. Divorce breaks the bonds connecting both parties and therefore the new changes to the beneficiaries re-align with those newly created ones towards the future for their dependents upon death.

Protecting the needs of beneficiaries

The changes of personal responsibility and needs as a result of divorce also alter those who depend on the policyholder. For example, some spouses get full custodianship of their children, and since the spouses are no longer responsible for their welfare, these changes enable them to protect their future needs even after death. The beneficiary of a life insurance policy can still meet their daily needs after passing on. Most legal provisions extend the power of the holder on their life after divorce. Exemptions exist where the holders choose not to make the changes, and the ex-spouse may remain as the beneficiary. The best way around this is by engaging an attorney throughout the process.

Divorce proceedings accord an individual the right to determine the beneficiary of a life insurance policy as per their preference or needs in the future after completion of the proceedings. The changes ensure they have control over those who stand to benefit from the policy after they die.