By the time divorce proceedings are over, most people feel fairly confident that everything relevant to the process is completed. This is understandable, as everything from asset division to signing the final divorce settlement tends to feel drawn out and especially thorough. Unfortunately, certain things can still be overlooked.
Insurance policies usually have a beneficiary designation that, in broad terms, stipulates the person to whom any financial returns should be paid. Beneficiaries are usually named at the time that the policy is established. During divorce, most couples in New York acknowledge that the other spouse is no longer an appropriate beneficiary, and note as such in their ensuing divorce agreement. But is this enough?
Documents such as divorce agreements do not trump an existing named beneficiary. This means that even after a couple divorces and agree that one party is no longer eligible to receive any benefits from a certain policy, if the named beneficiary is not changed he or she may still be entitled to the policy. For policies such as insurance and disability insurance, failing to update the beneficiary can be disastrous.
A divorce settlement can cover a wide range of subjects and outline agreeable terms for each party. However, this does not mean that certain legally binding documents do not have to be updated or changed. Similar to how a New York couple might agree that one party should retain ownership of the home, but both individuals are still responsible for a shared mortgage until that person refinances the mortgage, insurance policies should be carefully reviewed and updated to keep them in line with what the divorce settlement provides.
Source: Forbes, "5 Crucial Insurance Changes After Divorce", Barbara Marquand, May 25, 2016