Don’t Leave Life Insurance To Your Ex-Spouse!

Quote "Not all the people in your life are meant to stay"Ever heard horror stories about accidentally leaving an inheritance to an ex-wife or ex-husband? Here’s how it
happens–

Suppose you have a life insurance policy issued as part of an employee benefit plan that identifies your spouse as your primary beneficiary and your adult child as the contingent beneficiary. Maybe you even have a portion of the policy passing to your dog–this happens, too. 

Years down the road, your marriage ends and you get a divorce.

Your divorce decree provides that your ex-spouse is divested of all right, title and interest in any proceeds from your insurance policies. This solves that problem . . .right?  Nope.

Quick Answer –Why Is This Important To You? 

In layman’s terms, you need to re-name your beneficiaries under your insurance policy after a divorce unless you want your ex-spouse getting that money when you die.

The easiest way to avoid any of this happening is to make sure you review your beneficiary designations regularly and to update your beneficiary designations as your life changes.

  • Get married . . .change the beneficiaries
  • Have kids . . .change the beneficiaries
  • Divorce . . .change beneficiaries

There is case law to support the idea that a lawsuit could be brought against the ex-spouse to enforce the ex-spouse’s waiver of those benefits in the divorce decree; however, that may lead to protracted litigation and significant expense.

What does Texas Law Say?

Under Texas law, a designation in favor of a spouse is not effective after a decree of divorce or annulment is rendered unless the decree designates the ex-spouse as a beneficiary or the owner of the policy re-designates the ex-spouse as the beneficiary after the decree becomes final.

This saves you . . .right?

Maybe not.

State law applies to insurance policies acquired independent of your employment. If you die owning such a policy and you named your spouse as the primary beneficiary and then got divorced, the designation in favor of your ex-spouse would not be effective and the proceeds would pass to the alternate beneficiary.

What Does Federal Law Say?

However, insurance policies issued as part of an employee benefit plan are controlled by the Employee Retirement Income Security Act of 1974 (ERISA). This federal law trumps state law with respect to most employee benefits. Under ERISA, a plan administrator must distribute benefits to a beneficiary named in the plan regardless of the state law divesting the ex-spouse of his or her right to the benefits.

So if you obtained your insurance policy through your employer, your ex-spouse would be entitled to the proceeds.

Call our office for help or questions

We’re glad to visit with you about updating your will to change or add beneficiaries and to advise you on more changes to protect your family’s inheritance.  Give us a call at 817-6389016 to schedule an appointment or email us at Tweaver@WeaverLegal.net.

Travis Weaver, Attorney

Travis Weaver, Attorney

$100,000.00 Hotel Room? Only in Aggieland

Texas A&M recently auctioned off the rights to premier rooms located in their on-campus hotel. If this sentence is confusing, you aren’t alone. As tax deductions for things like football and basketball suites become increasingly scarce, the Aggies decided to get ahead of the curve with hotel room licensing.

Basically, Texas A&M will allow you to pay $100,000.00 (if you win an auction) for the right to reserve hotel rooms in the new Texas A&M hotel currently being constructed on campus. Your name will appear on the door of the hotel room and you get first dibs on these premium rooms directly adjacent to the football stadium. This $100,000.00 fee is complete tax deductible, although the website does recommend you speak to a tax professional before shelling out the 100k. A couple of things to watch:

  • prices depend on the game being played (much like other hotels in the area)
  • donors must reserve the room 45 days in advance of any football game
  • hotel has a pool, 24 hour room service, sports bar, and conference center
  • the hotel is using a private/public development partner, so watch out for IRS red flags if making the deduction
  • the hotel is being paid for by private funds and NOT student funds
  • this donation does NOT count towards 12th Man priority points for sporting events

This is an interesting idea and should provide Aggies the ability to stay in luxury while they watch their team lost at home.

If you have an interest in Aggie Football and happen to have $100,000.00 burning a hole in your pocket, do I have an idea for you!

If you need help designing an Estate Plan that may or may not leave money to an Aggie hotel, please give us a call today.

Gig Em

The Weaver Firm 817.638.2022

 

Do you have an Estate Plan . . . and I mean an Actual Plan?

 

Check out this information filled article from the New York Times about creating an actual plan for dealing with death. We can provide you with documents, and legal advice, but an actual plan involves family members, Certified Financial Planners, Insurance Agents, and more. Better to have some discomfort in your life now than to leave your loved ones with chaos down the road. Research funeral plans and costs to make sure your family members aren’t stuck with thousands of dollars in funeral expenses. Look at life insurance until your savings reach an amount you feel comfortable with. Do you have long term care insurance? Nursing homes cost around $7,000.00 a month. Does your Last Will and Testament cover all of your family members? Is it current? With proper planning and a good plan, some people can avoid probate altogether. Without a plan . . . chaos ensues.

Give us a call at 817.638.9016 to begin your plan.