Michigan residents who have gone through a divorce know that there is still much to do after matters such as spousal support, property division and child custody have been settled. Among the most important of these tasks is updating estate plans and changing the named beneficiary on life insurance policies and retirement accounts.
Husbands or wives are usually listed as the beneficiaries on these documents, but changes will often be made after a divorce. Michigan law makes provisions for spouses who neglect to make these changes, but the residents of many other states could face serious issues when named beneficiaries remain unchanged, even in cases where the terms of a will have been updated. This is because the beneficiaries listed on financial documents will generally have precedence over those named in a last will and testament.
While Michigan law appears to prevent payouts from life insurance policies and retirement accounts to former husbands or wives, it may still be prudent for spouses to change the named beneficiaries on these documents after a divorce. Litigation should be avoided whenever possible because there is always a degree of uncertainty in a court action, even when the law seems clear.
A family law attorney will likely recommend that spouses make these changes after a divorce. The U.S. Supreme Court has held that federal law will take precedence over state law, and federal courts have generally ruled in favor of the named beneficiaries on financial documents like life insurance policies. While it is unlikely that a dispute between former spouses over these matters will be heard in a federal court, the small amount of time required to make these changes could eliminate this risk altogether.
Source: Forbes, "Divorcing Women - Know The Laws Affecting Your Beneficiary Designations," Jeff Landers, April 9, 2015