Federal Life Insurance and Divorce

The final property division settlement in your Woodlands divorce case is the end of one part of your case, and the beginning of a very important next step. That step is to carry out the division of property described in the divorce decree. Often this includes removing your ex-spouse’s name from bank accounts, vehicle titles, and other assets you now own as separate property. Another category of assets where it can be critical to update your information after a divorce is with retirement assets and life insurance that rely on a beneficiary designation.

You might have heard some people say it is not important to update your beneficiary designations on life insurance because Texas has a statute that automatically makes a beneficiary designation to an ex-spouse ineffective. Texas does have a statute that in some cases renders a beneficiary designation of an ex-spouse ineffective under very specific circumstances, but not all circumstances. If you meet all of the requirements to rely on that statute you can choose to do so, but odds are your alternate beneficiary is still going to have to jump through some hurdles to convince the financial institution that the beneficiary designation is not effective. On top of that, there is the risk nobody will discover the issue which will result in your ex-spouse receiving all the funds.

In addition to those practical problems, there might be one very big legal problem. That problem is federal law. Texas law only operates when it is not superseded by federal law. And some life insurance policies are governed by the Federal Employees’ Group Life Insurance Act of 1954. For life insurance policies that are governed by federal law, the Texas statute making the beneficiary designation ineffective in some cases after divorce may not apply. The result being the benefits are paid to the named beneficiary, even if it is your ex-spouse after a divorce.

The final decree in your Woodlands Divorce is the end of one part of your case and the beginning of another part. Make sure you and your Woodlands Divorce Attorney take the steps necessary to complete the property division in your decree. Skipping this important step can result in your ex-spouse ending up with property that you probably did not want them to have.