Can a Spouse Change the Beneficiary on Insurance and Retirement Accounts?
Insurance benefits and IRAs or other retirement money are some of the most important assets discussed during divorce. The beneficiary of these assets is an important part of post-divorce proceedings, and it’s important for you and your ex to change those if you wish, once the divorce is final.
But another question people have asked during our Raleigh divorce workshop: Can my spouse change the beneficiary on his IRA or retirement plan without telling me?
In other words, while you are still married, can he or she change this? The answer: it depends.
Insurance Benefits
Irrevocable Beneficiary
If you are listed as an Irrevocable Beneficiary, then no, your spouse cannot change it. The point of this listing is that it can never be changed. Many people choose to list children as irrevocable beneficiaries, knowing that their financial obligations to children will never cease. While spouses are sometimes listed in this manner, it’s less frequent, because none of us can predict the future of our romantic relationships.
Revocable Beneficiary
Most people list a spouse as a revocable beneficiary for their life insurance plan or retirement accounts. If you and your spouse share a bookkeeper or financial adviser, he or she may inform you if this listing changes, depending on your agreements with that person. However, if your spouse has full control of his or her accounts and policies, it’s quite possible he/she could change the listing and you might not know about it until too late.
Divorce
Insurance policies meant to provide child support in the event of the payer’s death may list you as an irrevocable beneficiary. Judges sometimes rule this way or it is requested by divorce lawyers. Otherwise, the policy holder could let the policy lapse without your knowledge. (Read more in How Life Insurance is Used in Divorce.) If divorce proceedings have begun, but are not yet complete, your soon-to-be-ex will not be able to change the beneficiary.
Retirement Accounts
A federal law called EIRSA (Employee Retirement Income Security Act) dictates that most pension and retirement accounts leave 50 percent of the money to the person’s spouse, regardless of what the beneficiary designation says. This applies to 401(k) plans. However, IRAs are controlled by state law and do not automatically grant beneficiary rights to the spouse. The account owner can list whomever he/she wishes as beneficiary and change it whenever he or she wants to.
An Important Note About Your Will
It’s important to know that changes to your Will do NOT trump the beneficiary listings for your accounts and policies; it’s the other way around. After divorce, you may remember to update your Will and leave everything to your children or new spouse, but if your policies still list your ex, he or she will likely still receive that payout.
More questions about your divorce situation? Join us for our monthly divorce workshop to hear from legal and financial professionals.
