Life Insurance, Beneficiaries, and Divorce in Michigan: What You Need to Know
When going through a divorce, there are many financial aspects to consider, and one that often gets overlooked is life insurance. In Michigan, the Judgment of Divorce can have significant implications for life insurance policies and beneficiaries, particularly when it comes to removing or updating beneficiaries. Whether you’re in the process of divorce or you’ve just finalized it, understanding how life insurance and beneficiary designations work is crucial to protect your assets and secure your financial future.
Life Insurance and Divorce: How Are They Connected?
Life insurance policies (both term and whole life) are often considered assets during divorce proceedings. In Michigan, life insurance policies that were part of the marital estate may be factored into the division of property. Even if one spouse is the policyholder, the other spouse may have interest in the current surrender value of a whole life policy or the future beneficiary interest of the term life insurance policy.
Additionally, life insurance can play an important role in ensuring that financial obligations, such as spousal support or child support, are met in the event of a death. Michigan courts may require one or both parties to maintain a life insurance policy with the former spouse or the minor children as beneficiaries, as a security for child or spousal support.
Life Insurance After the Divorce
In Michigan, a Judgment of Divorce does not automatically change the beneficiary status of a life insurance policy. While the Judgment may say that the rights of the beneficiary are exterminated as it relates to the policy, or that a new beneficiary is to be named, this is generally not enough to change the contractual terms of the life insurance policy. This means that if the policyholder dies without updating their policy, the person/s named as the beneficiary may still collect. The only way to them make sure that the terms of the Judgment of Divorce are followed is to file an independent action against the estate of the deceased party for unjust enrichment, which can be a long and expensive process.
One of the most critical steps after a divorce is making sure that your life insurance reflects the terms of your Judgment. If the Judgment eliminates your former spouse’s interest in the policy and benefit, you should change the beneficiary status immediately. Further, if your Judgment requires that the former spouse or your children are now the beneficiary of the policy, you need to also ensure that you have changed the beneficiary status to reflect that language and provide a copy to your divorce attorney and your former spouse. It is essential to take action regarding your life insurance policy after a divorce is finalized.
Here are some tips for updating your beneficiaries in accordance with Michigan divorce laws:
- Review Your Divorce Judgment
Before making any changes, carefully review the judgment of divorce. In some cases, the court may have ordered that the ex-spouse remains a beneficiary on certain policies, especially if child or spousal support is involved. - Change Your Beneficiary
If the divorce judgment does not require your ex-spouse to remain as the beneficiary, update your life insurance policy by contacting your insurance provider. You can typically change the beneficiary to a new party, such as your children, another family member, or a trust. - Consider a Trust for Minor Children
If you have minor children and want to name them as beneficiaries, consider setting up a trust. Life insurance payouts to minor children are generally held by the court until they reach legal age. Setting up a trust allows you to designate a trustee to manage those funds for your children’s benefit. - Notify Your Employer
If you have life insurance through your employer, don’t forget to update your beneficiary designation with your HR department. Employer-provided life insurance policies often require separate documentation to change beneficiaries. - Update Your Will and Estate Plan
A divorce should prompt you to update more than just your life insurance. Make sure your will, retirement accounts, and other estate planning documents reflect your post-divorce wishes.
Legal Considerations: Consult Your Attorney
Every divorce is unique, and the way life insurance policies are treated in divorce cases depends on many factors, including the issues of spousal support, child support, and the relative property division. Michigan law allows for considerable discretion in determining how life insurance is handled, especially if there are children or ongoing support obligations. Therefore, it’s important to consult with your attorney to ensure that any changes you make to your beneficiary designations during and after divorce are in line with applicable law and facts of the case.
At Tabono Law, we help clients navigate the complexities of family law, including the impact of divorce on life insurance policies and beneficiaries. Our experienced legal team can provide guidance on updating your life insurance, ensuring that your ex-spouse is not included as a beneficiary (when appropriate), and protecting your assets for the future.
Key Takeaways
- Life insurance policies and the beneficiary status are considered assets under Michigan Law.
- A judgment of divorce does not automatically remove an ex-spouse as a life insurance beneficiary in Michigan.
- Michigan Courts can order that a spouse or children are named beneficiaries after a Divorce and Order that these terms are part of a Judgment of Divorce.
- Updating your life insurance beneficiaries after divorce is crucial to ensure your assets are distributed according to the terms of your Judgment of Divorce.
- Always review your divorce judgment and consult with your attorney before making changes to life insurance policies to comply with legal obligations.
If you need assistance with your divorce or want to learn more about how life insurance policies can be affected, contact Tabono Law. Our team is here to support you every step of the way.
About Tabono Law
Tabono Law is a family law firm based in Western Michigan, serving high-asset individuals with personalized legal strategies. Our experienced team helps clients through life’s toughest transitions with compassion and expertise.
