Many Texas women enter a divorce believing their spouse is no longer entitled to pensions, Social Security benefits and retirement savings such as 401(k), life insurance policies and other ERISA benefits once the divorce is finalized. They, or their beneficiaries, often find out later this is not the case because simply divorcing someone does not automatically negate their beneficiary rights. Before entering divorce proceedings, it is always wise to amend beneficiary designations on the benefits and in one’s will, because one does not necessarily make the other enforceable.
For women in Texas with high net worth, altering beneficiary designations prior to divorce may simplify and streamline the process later. However, if one’s spouse uses the same financial planner as the divorcing spouse, such a move may risk alerting the spouse prematurely of impending action. Once divorce proceedings have begun, a spouse cannot be removed as beneficiary on any marital assets until the action is complete.
In some circumstances, federal law may control instead of state law. For instance, if the beneficiary removal is challenged in appeals court after probate in the event of the divorcing spouse’s death, federal law may disregard the provisions of the spouse’s will or state law in favor of a different distribution scheme. In many cases, a spouse may not be removed at all without prior consent.
In cases where pension plans or other retirement income make up a sizable portion of marital assets, an attorney may have to examine the overall financial picture of the marital estate and what alterations have already been made to beneficiary status for the other spouse. The attorney might advise the client on what can and cannot be changed prior to the divorce proceedings being initiated and what state laws control the case.