If you have recently experienced a major life change, you need to review your beneficiary designations and estate planning documents.
Who Should Review Their Beneficiary Designations?
Anyone who is recently divorced, remarried or any person who had children should review their beneficiary information.
What Documents Should You Review?
- Retirement beneficiary information including pension, profit-sharing, 401(K), IRA, and/or Thrift Savings Plan beneficiary information.
- Life Insurance policies
- Transfer on death bank and brokerage accounts
Why Should Review Your Beneficiary Information?
There are numerous cases where an account owner has divorced and failed to remove his or her ex-spouse as beneficiary of their account. It can be frustrating to the surviving children that their former step-parent gets a windfall from their parent’s retirement account or life insurance policy. Even though the account may be address in a Final Decree or a Separation Agreement, you must still make the change with your account or plan administrator.
Additionally, if a child is named as your beneficiary, make certain that any children born after the document was initially signed have been added as a beneficiary. If you fail to add them, they may not receive any benefit from the account.
What Happens if You Fail to Review Your Beneficiaries?
If you fail to review your beneficiary information, federal or state law may decide who is the beneficiary of your account.
I Changed My Will. Isn’t that Enough?
Simply changing your will to disinherit your ex-spouse is not enough. The accounts we are referencing in this piece are non-probate assets. Meaning they do not pass under the terms of a will. The beneficiary designations supersede the terms of the will. Therefore, you need to change your beneficiary designations in addition to executing a new will.
What Should I Do Now?
- Check the default provisions of the documents governing your retirement account.
- Check with your plan administrator to determine who your beneficiary is.
- Consult your accountant to determine the tax implications of naming someone as your beneficiary
- Make any changes in beneficiary with your plan or account administrator
- Request a receipt from the administrator to ensure all changes were made correctly.
- Please note you cannot change your designations to “cut out” your spouse some of your non-probate assets like pensions or profit sharing plans, while you are still married without your spouse’s consent. Federal law prohibits removing your spouse from some types of accounts without your spouse’s consent.
We are experience family law and estate planning attorneys. If you need help with a will, power of attorney or estate plan in Chesterfield, Colonial Heights, Dinwiddie, Hopewell, Petersburg, Prince George, or Sussex. Give us a call at (804) 668-5327 or email us at Contact@paulperduelaw.com to schedule a consultation.
Spousal Support May Not Be Modifiable Without the “Magic” Language:
If you do not include the appropriate language in a separation agreement, you will not be able to modify spousal support in the future, even if you lose your job. Separation Agreements are an excellent choice for divorcing spouses. They provide a cost effective and lower conflict alternative to a trial. However, it is a mistake to view them as simple and easy. They are complex documents that are often the product of hours of negotiation between each party’s counsel. With easy access to information and a struggling economy, many spouses elect to draft separation agreements on their own. Unfortunately, their attempt to save a few hundred dollars up front could cost them thousands of dollars and hours of lost sleep and heartbreak in the long run.
The Virginia Code states in part that if there is an agreement between the parties for the payment of spousal support, then no court order relating to the payment of support shall be entered except in accordance with the contract. VA Code § 20-109(C). In plain English, if you don’t say the requirement to pay spousal support terminates upon a specific event or the support may be modifiable upon a change in circumstances, then the court will not change the amount of or stop the monthly spousal support obligation. If your separation agreement does not state the spousal support is modifiable, the court is not going to care you were laid off or become disabled. You still must pay the support obligation.
Take the recent case of Mr. Newman. Mr. Newman sought to reduce his monthly spousal support obligation. The agreement he entered into with his ex-wife said spousal support only terminated upon death or remarriage. The court, while sympathetic to his plight, stated their hands were tied by Virginia Code Section 20-109(C). Without language in the agreement stating the spousal support was modifiable upon a material change in circumstances, the Court could not on its own, modify the award. It denied Mr. Newman’s request to modify the amount of spousal support.
What Should You Do?
If you are the primary income earner, don’t just sign an agreement to be nice, to be fair or just to get the painful process over with. Consult a competent, experienced attorney before you sign anything. Too many people come to see me after they have signed a bad agreement and have no recourse. The time to consult an attorney is before you sign. To paraphrase the old TV commercial – pay now or pay later!
We have years of experience in family law. If you need help with a divorce, custody case, or other family law matter in Chesterfield, Colonial Heights, Dinwiddie, Hopewell, Petersburg, Prince George, or Sussex. Give us a call at (804) 668-5327 or email us at Contact@paulperduelaw.com to schedule a consultation.