For many Texas spouses who have gone through a divorce, the property division settlement reached during the divorce procedure is presumed to be final. In reality, however, that may not always be the case. For some individuals, the ultimate division of benefits has less to do with their divorce settlement and more to do with their estate planning documents.
Failing to remove one’s former spouse as the designated beneficiary on various accounts can result in he or she receiving a financial windfall in the event of one’s death. This is possible due to the nature of beneficiary designations, which are valid even after a divorce takes place. In fact, an individual can draft an entire new will and leave everything to a new spouse, but if the old partner remains listed as a beneficiary, the designated assets will pass to the former spouse.
Many types of accounts require a named beneficiary. Examples include banking accounts, retirement savings, life insurance and investments. The beneficiary paperwork on such accounts is usually completed when the account is opened, then promptly forgotten about. While there may be the rare ex-spouse who intends to leave an inheritance to his or her former partner, most of these types of estate planning outcomes are the result of an oversight.
The best way to ensure that the division of benefits that is agreed upon during divorce is the full extent of one’s generosity to their ex is to check that the proper beneficiaries are named on all accounts. This is a step that should be part of a Texas resident’s divorce checklist, as well as their estate planning approach. Changing beneficiary information requires very little time and effort, and the end result is well worth the expenditure of both.
Source: wealthmanagement.com, “Error in Planning Can Benefit the Ex-Spouse“, June 1, 2015