Changing the beneficiary after divorce will ensure that a life insurance benefit from a company plan will be paid out to the person you desire.

Many employers provide a plan that includes a life insurance benefit that will be paid out in the event of the employee’s death.

Unfortunately, many people forget to change the beneficiary after divorce.  In some cases, a divorce may never have been finalized.

In these cases, questions will undoubtedly arise as to who will receive the life insurance benefit from a company plan after the death of the employee.

To prevent this from happening and the effect it can have on families, it is important to designate a beneficiary to ensure that the life insurance benefit will be paid out to the person or people that you desire.

Terms of the Plan

Now is the time to review the company plan.  Don’t wait until it’s too late.  By reading the terms of the plan, you will understand how to designate a beneficiary.  By designating a beneficiary, you will know who the life insurance benefit will be paid out to.

As I mentioned, in some cases, a divorce may never have been finalized.

Who will receive the life insurance benefit?

Many people are surprised when they realize that the life insurance proceeds from a company plan will not be paid out to the children.

If the employee did not designate a beneficiary and a divorce was never finalized, by the terms of the plan, the life insurance benefit may be paid to the surviving legal spouse.

A Court Order May Not Help

Trying to get a court order, which requires payment of benefits into the employee’s estate or to the children according to Pennsylvania statute, may not help.

ERISA Governs Employee Benefits

The Employee Retirement Income Security Act of 1974 (ERISA) is the federal law that governs employee benefits.

If ERISA’s mandate, requiring payments to beneficiaries designated by the terms of the plan, pre-empts the state law, then the life insurance proceeds may not be paid to the estate or children of the employee.  By the terms of the plan, the life insurance benefit may be paid to the surviving legal spouse.

The Bottom Line

This article highlights the importance of designating a beneficiary and changing the beneficiary after divorce to ensure that a life insurance benefit from a company plan will be paid to the person you desire.