Friday, January 16th 2009
Parties Should Update Life Insurance Following Divorce
One of the areas often overlooked in divorce is updating life insurance and estate planning documents after the divorce is finalized. A recent case from the U.S. District Court for the 9th Circuit demonstrates the risk of not doing this.
Jerry Ortiz was a police officer who divorce his first wife. The final divorce decree awarded "all right, title and interest in any and all [of his] retirement/pension, 457(b) plans, 401(k) plans or other deferred benefits" in the officer's pension plans to him. But the judgment also included a pre-printed notice stating that it didn't automatically cancel either spouse's rights "as a beneficiary of [a] life insurance policy."
Deputy Ortiz officer never changed the beneficiaries on his insurance policies. He remarried, and a month later he was killed in the line of duty.
The insurers sought a judicial declaration as to which of the spouses was entitled to the $500,000 in life insurance benefits.
The former wife argued the divorce judgment's language was not specific enough to divest her of her expectancy interest in the benefits.
The current wife and now widow argued that Officer Ortiz had intended to change the life insurance beneficiary, and had told several people, including his attorney, of his intent to do so. Therefore, his current wife argued that she was entitled to the life insurance proceeds, not the former wife.
The court agreed with the former wife, and awarded the life insurance proceeds to the former wife.
The lesson is this: Following a divorce, take care of the details. Update your insurance policies. Change title to your property. Update your will. Chief Justice Kozinski put it best: "Deputy Ortiz, like the rest of mankind, must have believed that he had plenty of time. Imprudent, perhaps, but very human. Who amongst us hasn't put off dealing with wills or other unpleasantries that remind us of our own mortality?"
The divorce attorneysat Crider Law in Roseville, California, provide solutions to families in these types of situations. We can help you with the details of making sure that your hard-earned assets go where you want them, and don't wind up where you don't want them to be.
View other articles for: Divorce and Separation, Estate Planning