Ancillary issues in California divorce: Insurance

The divorce process is long, difficult, and can be complex.  At the end of it, most clients/litigants/parties just feel relieved it’s over and don’t want to think about any aspect of the whole process anymore.  This is a dangerous place to be in, regardless of how natural it is after such an ordeal, because many loose ends can ultimately remain loose and come back to hurt you and your family.  We’ll focus on insurance today, but there are other loose ends in terms of financial/college planning, estate planning, and taxes that should also be addressed post-divorce.  With regard to insurance, if you’re getting divorced or have just become divorced, you should:

1. Update the beneficiaries on your life insurance.  The same is true for any of your other payable on death (POD) accounts or retirement accounts, 401Ks, etc.  You don’t want your ex to get the money should something happen to  you, do you?
2. Look into health insurance plans and cost.  If you are covered under your spouse’s health insurance plan, once you are divorced, you can no longer be covered by that plan. So you will need to look into COBRA, if that is available, or look into getting your own plan.  This can be a lengthy and difficult process, in California can dramatically affect support calculations, and be shockingly expensive, so the earlier you look into this and are prepared, the better.
3. Update/change your home and auto insurance.  Most couples will separate their auto insurance, which may mean losing a multiple car discount, and may also lose a combination discount if your home insurance is bundled with your auto insurance. Speaking of home insurance, you want to make sure you update that if one spouse moves out of the family home.  Your best bet is to talk with an experienced insurance broker who can help you.  A broker is better than a captive agent (State Farm, Nationwide, etc.) and much better than trying  your luck online.

These are the main insurances to worry about. Some couples will have to work with long-term care policies or other kinds of insurance, and each circumstance varies depending on the individuals and family involved. But it’s very important not to leave these loose ends untied at the end of a divorce, regardless of how tired you are of the process.  The best way to deal with these things is to have professionals working for you, who make the process easier.

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Changing beneficiaries during/after California divorce

While you are married, generally you name your spouse as the beneficiary on your life insurance, 401K, pension, etc. Once you get divorced, however, you are going to want to change those beneficiaries. This may sound simple, but it is extremely common for someone to forget and their ex-spouse ends up with their assets upon their death.

Why is that? I can only guess. First, as I have discussed before, during the time your case is in the court system (after you have filed your Petition but before you have your Judgment), you MAY NOT change any of your beneficiaries or your will or trust without consent from the other party. You cannot even sever a joint tenancy without notifying your spouse. But AFTER, when the case is over, you are not only free to do so, but you really need to.

I think some people forget, or once they have their Judgment, they want to put all of the hassle behind them. Don’t do this! You took the effort to get divorced – don’t forget to complete the process and change the beneficiaries on your accounts!

A friend of mine came to me recently because the spouse of a colleague of his had passed away. The only asset this person left was a life insurance policy that named a girlfriend of his from nearly twenty years before. She’s likely to lose her home because her husband, in twenty years, never changed his life insurance policy beneficiary.