Change Beneficiaries
by Mary Whipple
When a divorce action is filed in California, Automatic Temporary Restraining Orders (ATRO’s) go into effect which, among other things, prevents the parties from changing beneficiaries while the action is pending. See the full text of the ATRO’s below. ATRO’s go into effect as to the Petitioner when the Petition is filed and as to the Respondent when he or she is served with the Summons and Petition. In other words, the Petitioner can only change beneficiaries without getting the prior written consent of the other party 1) before the petition is filed or 2) after the divorce is final. The Respondent can only change beneficiaries without the prior written consent of the other party 1) before the petition is filed, 2) before the Respondent is served, or 3) after the divorce is final.
[Full text of ATRO’s]
Standard Family Law Restraining Orders. Starting immediately, you and your spouse or domestic partner are restrained from
1.Removing the minor child, or children, of the parties, if any, from the state without the prior written consent of the other party or an order of the court;
2. Cashing, borrowing against, canceling, transferring, disposing of, or changing the beneficiaries of any insurance or other coverage, including life, health, automobile, and disability, held for the benefit of the parties and their minor child or children;
3. Transferring, encumbering, hypothecating, concealing, or in any way disposing of any property, real or personal, whether community, quasi-community, or separate, without the written consent of the other party or an order of the court, except in the usual course of business or for the necessities of life; and
4. Creating a nonprobate transfer or modifying a nonprobate transfer in a manner that affects the disposition of property subject to the transfer, without the written consent of the other party, or an order of the court. Before revocation of a nonprobate transfer can take effect or a right of survivorship to property can be eliminated, notice of the change must be filed and served on the other party. (Mary Whipple)
Life Insurance
Life insurance policies are independent of marriage or divorce status. The policy or the benefits of the policy, should a death occur, are not community property like a 401(k) or an IRA so there is no requirement that a spouse is the beneficiary of a life insurance policy nor does a current or former spouse have any claim to a life insurance policy payout. Consequently, a review of the life insurance coverage of yourself, your spouse and your children is important.
With some exceptions, the owner of the policy is the person who is paying the premium and the owner can change the beneficiary anytime he or she wishes. The insured person may or may not be the owner. This means that you or your ex-spouse can change the beneficiary of a policy as long as you are the owner. In the case of employer paid life insurance, the employee has the power to change the beneficiary. This also means that you can arrange to have a policy insuring the life of your ex-spouse with you being the owner (and paying the premiums) and you being the beneficiary if your ex-spouse should die. This may be appropriate if you or your children are dependent upon your ex-spouse’s continued income for things like child support, spousal support or future education expenses.
Remember to review those policies that insure your life and make sure that you have the appropriate beneficiary. This may include accounts such as 401(k). In my Human Resources career I have seen occasions where an employee forgot to change their beneficiary and when the employee died, we had to pay the company life insurance to the ex-spouse rather than to the current spouse or children. If you make your minor children the beneficiaries of your life insurance, the payment will be held until a guardian is named and that person files a claim on behalf of your minor children. To simplify the payment you can name a trustee to receive the proceeds on behalf of your minor children. That person should also be named in your will with any specific directions on how you wish them to manage the funds on behalf of your children. You can get simple wills done inexpensively so shop around before retaining an attorney to write one for you although you should have some way to have the will reviewed by a qualified attorney.
Whole life insurance products create cash value over time while term life does not. Employer’s plans are almost always term life (I don’t know of any exceptions but small companies could be sold a hybrid product as a “savings” plan.) If you or your spouse have been paying into a whole life policy there may be cash value in it. You may want to determine how much for consideration of you joint assets. If you are the owner of a whole life policy and you want to keep the coverage but need to significantly reduce the cost, consider getting term insurance and cashing out can cancelling the whole life policy. Term insurance can be purchased with provisions that guarantee renewal up to a very advanced age so make sure that you are buying a product that meets your long term needs. Because you will need to establish that you are insurable, do not cancel your existing insurance until your new insurance has been approved and is in effect.
Health Care Insurance
What could happen: If you and your children are covered under your spouse’s insurance, your spouse may not discontinue your coverage while the divorce is pending. Once your divorce is final, most all employers’ plans require that your coverage is dropped from their plan. The plan may also require that your children be dropped, depending on custody considerations. An agreement by your spouse to provide coverage does not obligate their employer or the insurance carrier to provide coverage if the rules of the plan don’t allow it.
You want to make sure that your health care insurance is in place and the carrier understands the circumstances. When a major claim is filed the carriers may review the status of the ill or injured individual to see if there is some way to get out of paying. Just because they have been accepting premiums for the coverage does not obligate them to honor the claims if the person covered does not meet the provisions of the plan. If your spouse is carrying you on their employer’s plan after you are divorced, you may not qualify and, as a result, are not really covered for major medical issues. Always verify your coverage with the carrier and/or the employer’s Human Resources department and make sure they know your marital status.
Do not allow you or your children to be without medical coverage for more than 60 days. If you do, once you do get health care insurance, your carrier will likely impose a pre-existing clause that will not cover any existing condition for up to two years. That can create major problems if a relatively minor medical problem becomes serious and requires aggressive treatment or surgery.
COBRA provision
If you or your children are dropped from a healthcare insurance policy for any reason, you should be notified by the carrier and be given the option to purchase the benefits under COBRA. Insurance under COBRA is usually expensive because employer’s plans are generous from an insurance perspective.
Don’t feel that you have to make an immediate decision about enrolling in the COBRA benefits. You generally have 60 days to elect coverage under COBRA and, if you elect coverage, it will be retroactive back to the time that you coverage ended. This gives you a little time to shop around and see if you can find a policy at a lower rate. Not only are employer’s plans typically generous, with low deductibles and immediate coverage for doctor visits, they are also based on the average age and health of the group covered. If you are younger or have not record of significant health problems, you may be able to find a better rate. On the other hand, if you have a serious or chronic medical problem, you may find that COBRA rates are a good deal. Just remember to make your decision before your COBRA enrollment opportunity expires.
When your coverage terminates you should receive a “notice of creditable coverage” that states how long you were covered by the policy. Don’t lose that document. It will allow you to prove that you have had continuous coverage and avoid a pre-existing condition limitation.