So, after a long, drawn out, expensive legal battle, your divorce is finally all done. Congratulations. Thank goodness that financial debacle is behind you…or is it? Before you start the celebration, you might want to make sure to update and change any beneficiary designations on life insurance and retirement accounts that previously named your ex-spouse.
Failing to do so may have you turning over in your grave if upon your untimely death your ex-spouse is still named as a beneficiary and is able to cash in on your life insurance and retirement account you left behind. Unfortunately, this situation is happening quite frequently leading to litigation across the country between families of the deceased and ex-spouses. The answer to who will win, is not always that clear.
Probate v. Non-Probate Assets
Many people do not realize that life insurance and retirement accounts are handled very differently than other assets such as real estate and regular investment accounts when it comes to probate and estate matters. When there is a beneficiary designated on life insurance or a retirement account, these assets do not pass through the estate of the person that passed away. Instead, they go directly to the named beneficiary and are considered “non-probate” assets.
This means that even if you have a Last Will and Testament that says your brother Bob is to inherit your IRA, Bob may not see a penny of it unless you specifically name him as the beneficiary on the beneficiary designation forms on file with the financial institution that handles your IRA.
What Are The Rules For Divorce with Probate or Non-Probate Assets?
Unfortunately, the law in this area is complicated. If litigation arises between the ex-spouse and the family over entitlement to the funds, who will win will depend on many things including:
- The contractual language of the plan and policy
- Applicable Federal Law
- Applicable State Law
- The language, if any, in the divorce decree/judgment
This problem has become so prevalent that many states are now passing laws that automatically revoke the designation of a former spouse or domestic partner as beneficiaries if the insured failed to designate a new beneficiary after divorce. There are exceptions to when this is applied however.
Families Must Be Proactive
Unless someone tells the insurance company that the insured was divorced, it is very likely the insurance company will simply pay the former spouse as the named beneficiary. Once this happens, the task of getting the money back from the former spouse will be very difficult and likely very expensive legally.
In order to prevent this problem, the insured’s family should immediately give written notice to the company handling the insurance policy or retirement account that they are contesting the ex-spouse's entitlement to the benefits payable. Once the company is aware of the dispute, it is likely they will pay the money over to the court and let the court decide who is entitled to the funds.
How Louisiana Law Treats Beneficiary Designations After Divorce
Louisiana law and federal law treat the same problem — an ex-spouse remaining on a beneficiary designation — very differently depending on the type of account involved. The result is a patchwork of rules that surprises many divorced Louisiana residents:
- Life insurance policies (Louisiana-governed). Under La. R.S. 22:647, the designation of a former spouse as beneficiary on a life insurance policy is revoked by operation of law upon entry of a final divorce decree. The insurer pays the alternate beneficiary if one was named. If no alternate beneficiary was designated, the proceeds are paid to the insured’s estate and go through the succession. The divorce itself acts as the revocation — no separate form needs to be filed.
- IRAs (Individual Retirement Accounts). IRAs are not governed by federal ERISA law. Louisiana state law can apply, and La. R.S. 22:647’s revocation-by-divorce principle may affect IRA beneficiary designations governed by Louisiana law. However, IRA custodians vary in how they apply state revocation statutes, and the issue is not always simple. Updating IRA beneficiary designations after divorce is essential regardless.
- ERISA-governed workplace retirement plans (401k, 403b, pension). Here is where the critical problem arises. Federal ERISA law expressly preempts state revocation-by-divorce statutes for employer-sponsored retirement plans. The U.S. Supreme Court confirmed in Egelhoff v. Egelhoff (2001) that a Washington state revocation-by-divorce law was preempted by ERISA and could not revoke the designation of a former spouse on a retirement plan. Louisiana’s La. R.S. 22:647 has no effect on an ERISA plan. The plan must follow the designation on file — and that designation may still name the ex-spouse years after the divorce.
The Real-World Consequences of an Unchanged ERISA Beneficiary
The ERISA preemption problem creates genuinely devastating results for families. An ex-spouse who was never removed from a 401k beneficiary designation receives the entire plan balance — including years of post-divorce contributions and earnings — when the plan participant dies. This happens even if:
- The divorce decree states that the ex-spouse is entitled to nothing from the retirement account.
- The plan participant executed a new will leaving everything to their current spouse.
- The plan participant remarried and has a new spouse and children who were intended to inherit.
- The ex-spouse waived any rights to the retirement account in the divorce settlement.
None of these documents override the beneficiary designation form on file with the plan administrator. A will does not reach ERISA assets. A divorce settlement stating the ex-spouse waives rights does not automatically revoke the designation (unless a Qualified Domestic Relations Order — a QDRO — was entered that specifically addressed this). The plan pays the designation on file, period.
What to Do After a Louisiana Divorce: The Beneficiary Audit
Every divorced person should conduct a complete beneficiary audit immediately after the divorce is final — and again after any major life change (remarriage, birth of child, death of a named beneficiary). The audit covers:
- Employer retirement plans (401k, 403b, pension). Contact HR or the plan administrator directly and request a copy of the current beneficiary designation on file. Change forms must be submitted to the plan administrator — not to your attorney or in your will. Each plan has its own form.
- IRAs (traditional, Roth, rollover). Contact each IRA custodian (the bank or brokerage) separately. Many custodians allow online updates, but they must be completed through the custodian’s system — not through a will or general legal document.
- Life insurance policies. Contact each insurer for each policy you own. If multiple policies exist through multiple employers or individually purchased, each requires a separate update. Verify that the current beneficiary is correct and that contingent beneficiaries are named.
- Payable-on-death (POD) bank accounts and transfer-on-death (TOD) brokerage accounts. These non-probate assets pass directly to the named beneficiary. Update them at the bank or brokerage directly.
- Annuities. Contact the insurance company that issued each annuity. Annuity beneficiary designations are separate from life insurance beneficiary designations even if purchased from the same company.
The Last Word
If you are getting divorced, do your family a favor and simply take care of changing your beneficiary designations on life insurance and retirement accounts. It is good practice to review those designations yearly or whenever life changes happen to make sure your beneficiary designations reflect who you want to receive those benefits. Contact us online or call us at (504) 264-1057 to learn how we can help you protect your rights.Why Divorce Does Not Automatically Remove an Ex-Spouse as Beneficiary in Louisiana
Most people assume divorce removes an ex-spouse’s beneficiary rights — this is wrong. Louisiana law revokes testamentary provisions in favor of an ex-spouse upon divorce, but beneficiary designations on insurance policies, retirement accounts, and other non-probate assets are not automatically changed. If you don’t update these designations, the ex-spouse may remain in line to receive substantial assets.
Louisiana community property rules govern which assets acquired during the marriage belong to the community estate. Termination of the community regime has no effect on contractual beneficiary designations. A beneficiary designation is a contractual arrangement between the account holder and the institution — only the account holder can change it by submitting a change-of-beneficiary form.
The result is a common situation: a person divorces, goes years without updating life insurance or 401(k) beneficiary designations, and then dies. The ex-spouse receives the policy proceeds or retirement account balance while the current spouse, children, or other intended beneficiaries receive nothing. Louisiana courts have upheld these outcomes even when everyone agrees the result was contrary to the deceased’s wishes.
Under Louisiana’s intestate succession rules, which determine who inherits the probate estate when there is no will, the ex-spouse typically receives nothing after a divorce — Louisiana law treats divorced spouses as legal strangers. But intestate succession only governs assets that pass through probate; it has no effect on retirement accounts, life insurance, or other beneficiary-designated assets that transfer outside the estate entirely.
Some states have enacted statutes that automatically revoke beneficiary designations upon divorce — Louisiana has not enacted a comprehensive statute of this type for all asset categories. Louisiana residents who divorce face greater exposure than residents of states with automatic revocation rules. The burden falls entirely on the individual to identify every account and policy where an ex-spouse is named and submit the necessary paperwork.
Federal Law and Employer-Sponsored Plans: When ERISA Overrides Louisiana Law
For employer-sponsored retirement plans — 401(k), 403(b), pension plans — federal law under ERISA governs the beneficiary designation rules, not Louisiana state law. This federal preemption means that even when Louisiana law might otherwise protect a surviving spouse, ERISA requires the plan to pay the designated beneficiary regardless of any state court order or divorce settlement.
The U.S. Supreme Court has repeatedly held that ERISA plan administrators must pay the designated beneficiary as named in plan documents, even when a divorce decree or waiver agreement purports to direct funds elsewhere. An ex-spouse who signs a divorce settlement agreeing to “waive all rights” to the retirement account may nonetheless receive the funds if they remain the named beneficiary — ERISA requires following the plan documents, not the divorce settlement.
A Qualified Domestic Relations Order (QDRO) is the one mechanism that can redirect retirement plan benefits to a former spouse under ERISA. A QDRO entered during divorce proceedings directs the plan administrator to divide the account and create a separate account for the former spouse. However, a QDRO addresses already-accumulated benefits — it does not automatically change the beneficiary designation for future death benefits. After a QDRO, the participant may still need to separately update beneficiary designations for the remaining account.
Individual Retirement Accounts (IRAs) are governed by state contract law and the IRA custodian agreement, not by ERISA — different rules apply. Louisiana state law and the custodial agreement determine who receives IRA benefits at death. Since Louisiana lacks comprehensive automatic revocation statutes, the practical advice is the same: update IRA beneficiary designations explicitly and promptly after any divorce.
Life insurance policies are governed by Louisiana’s Insurance Code and the terms of the individual policy. Louisiana law does not automatically revoke a life insurance beneficiary designation upon divorce. The policyholder must contact the insurance company directly, submit the required change-of-beneficiary form, and confirm the change was processed. Simply naming a new beneficiary in a will does not override a conflicting beneficiary designation on a life insurance policy — the policy designation controls.
Building a Post-Divorce Beneficiary Review Into Your Estate Plan
The only reliable protection against outdated beneficiary designations is a systematic, comprehensive review of every financial account and insurance policy immediately after a divorce, and then at regular intervals. Creating this habit — treating the beneficiary review as a non-negotiable part of the divorce process — is the most important practical step any divorcing person can take.
The review should cover every asset with a beneficiary designation or payable-on-death or transfer-on-death feature: employer-sponsored retirement plans, individual retirement accounts, life insurance policies, annuities, bank accounts with payable-on-death designations, brokerage accounts with transfer-on-death designations, and health savings accounts. For each one, the account holder must contact the institution, request the current beneficiary designation form, and submit a new form naming the intended successor. Keeping copies of submitted forms and confirmation letters is essential.
For people with significant assets, a revocable living trust named as beneficiary of retirement accounts provides more control over how inherited assets are managed and distributed than naming an individual beneficiary directly. A trust properly drafted for retirement account beneficiary purposes — sometimes called a “see-through trust” or “conduit trust” — allows the beneficiaries to receive required minimum distributions over their own life expectancies. After a divorce, if the estate plan is being comprehensively revised, the question of whether to use a trust as beneficiary deserves careful analysis.
The divorce settlement agreement itself should address beneficiary designations explicitly, particularly for employer-sponsored retirement plans where a QDRO may be required. Divorce attorneys should include specific provisions requiring each party to update beneficiary designations within a set period after the divorce is final, identifying the specific accounts and policies that must be updated, and including a constructive trust provision if the other party fails to act.
A periodic estate plan review — at a minimum every three to five years and after every major life event — is the long-term solution. People who remarry, have additional children, experience the death of a named beneficiary, or accumulate new accounts must revisit their designations just as thoroughly as someone going through a divorce. An estate planning attorney can help create a checklist of accounts and policies that need to be reviewed, the steps required to update each one, and the intervals at which review should occur.