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Jun 29, 2022

Effect of Divorce on the Designation of Beneficiaries

Divorce in PA

In a divorce, governed by the laws of the state of Pennsylvania, equitable distribution provides for the division of non-probate assets or assets not identified in a person’s will. Examples of non-probate assets include checking and saving accounts, retirement accounts, life insurance policies, mutual funds, annuities and certificates of deposit. If non-probate assets are not addressed during the divorce process, the results can be disastrous. Pennsylvania law provides any designation in favor of a former spouse which was revocable by the opposing party after the divorce shall become ineffective for all purposes and shall be construed as if such former spouse had predeceased.

Michael Routh, an Attorney at Alpha Center for Divorce Mediation, talks about what happen to your beneficiaries after divorce in the state of Pennsylvania.

Recently, I received a distressed phone call from a former client whose spouse had passed away. The parties had divorced roughly six months ago and had agreed to leave each other as beneficiaries on their life insurance policies for the sake of their children. I recommended to make sure they removed any reference to the word “spouse” in the beneficiary section of these policies. If they left that reference, Pennsylvania law would nullify the designation. Unfortunately, the deceased spouse neglected to make the change and the tax-free benefits are now headed to the estate for probate and estate tax. Even if the insurance company makes an error and pays the benefits to the spouse, the party is required to correct the error should someone challenge the payment.

It is essential to identify the assets in a divorce that require a change of beneficiary designation. Some assets allow for the change once the property settlement agreement has been signed but some will require evidence of a divorce decree. It will be the responsibility of the parties to make these changes as it does not fall to the attorney or the Court. Good practice involves several reminders to the clients about this necessary step throughout the divorce process. Accepting guidance from a firm that specializes in the practice of divorce mediation will ensure a smooth path along the difficult road of divorce. Alpha’s program may not be fast and cheap, but it will certainly save you time and money over the long run. Let our expertise help ensure the best possible outcome for you, your spouse, and your family.

Contact us today

Alpha Center for Divorce Mediation
Email: alphacares@alpha-divorce.com
Phone: 1-800-310-9085