Q. My parents divorced in 1982. Our father was completely absent and mother raised her three children on her own. She died in 1993. We were 19, 18 and 12 and moved in with our grandparents. Fast forward to 2014 when we got a letter from New York Life to my dad. It turns out he was the beneficiary of a life insurance policy on my mother. We ignored him, but we have since learned that he cashed in the police. We have since learned that he has Harleys for him and his girlfriend, a truck, a boat, a house and more. I have heard some states automatically revoke a divorced spouse from being a beneficiary. Should it have happened here?
A. We are very sorry for your loss and the relationship you have with your father.
It is complicated.
In general, the person listed as the beneficiary of a life insurance policy is entitled to receive the product, Jerry Lynch, a Certified Financial Planner from JFL Total Wealth Management in Boonton.
And in many states, after a divorce, the spouse is required to maintain insurance to protect children and the ex-spouse in the event of premature death, at least for a period of time, he said.
Now in New Jersey, under NJSA 3B: 3-14, an ex-spouse is automatically revoked following a divorce.
He says that beneficiary status is revoked unless the right of the ex-spouse is expressly preserved by “an administrative act, court order or contract relating to the division of matrimonial property concluded between persons divorced before or after marriage”.
So to understand the situation with your father, you need to know what the divorce agreement says, Lynch said.
Let’s talk about estate planning for a moment.
Most significant assets don’t go through a will and the normal probate process, he said. This is why it is extremely important that special care is taken to ensure that these assets go to the right people.
Lynch offered these examples:
The property is often jointly owned upon marriage, he said.
“The wording you typically see is JTWROS – roommates with rights of survivorship – which means if the wife dies, the husband automatically gets the property, and that avoids probate,” Lynch said.
Then there are assets like IRAs and 401 (k) plans. These have beneficiary designations that dictate who will get the money and they avoid probate, he said. Ditto for life insurance, which has beneficiary designations that dictate who will get the money. It also avoids homologation.
“It is extremely important that if you are getting a divorce you look and see how these assets are titled and the beneficiary wording if applicable to avoid these issues,” he said. “It happens a lot more than you think, and the consequences are devastating financially and emotionally.”
Lynch said the life insurance company wouldn’t know your parents were divorced unless your parents let them know.
“I don’t know what their responsibility is here because if they had never been told about the divorce then it would be difficult to prove that they did something wrong,” Lynch said, noting that you should speak up. to a lawyer of the matter.
Lynch said something else was about him. You mentioned that your dad has a bunch of depreciating assets, such as vehicles.
If you sued him for money – and didn’t say how much the police were worth – would you go somewhere?
“My question is, how much was the policy and does he have enough assets to pay the obligation?” Probably not, ”Lynch said.
Email your questions to [email protected].
Karin Price Mueller writes on Bamboo column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com‘s weekly electronic newsletter.