Married individuals are typically the beneficiaries of their spouse’s life insurance policies/retirement accounts. Following a divorce or an annulment, most individuals will update their beneficiary designations on their life insurance policies/retirement accounts to remove their former spouse.
There are situations, however, where one spouse will leave the other as a beneficiary following the entry of a divorce decree i.e., insuring an alimony award. Although previous law did not inform former spouses about updating their beneficiary designations, Act (HB 875) amending Title 23 of the Pennsylvania Consolidated Statutes recently passed, now requires a decree of divorce or an annulment of marriage to include such a provision.
HB 875 will become effective towards the end of April 2023.
Before HB 875, a divorce or an annulment ended with the entry of a decree disposing of existing property rights, interests between the parties, custody, child support, alimony, reasonable attorney fees, costs, and expenses, etc. Previously, decrees did not mention beneficiary designations, nor did they include language advising a previous spouse to update their life insurance policies/retirement accounts following the entry of a decree.
Wanting to ensure that life insurance policy/retirement account benefits go where the policyholder intends, HB 875 informs the parties via the decree to update the beneficiary status on their policies/accounts. Thus, a decree granting a divorce or an annulment shall now include all of the previously required contents as discussed above and must also address beneficiary designations. The decree must consist of “a provision informing the parties to reaffirm or change the beneficiary status on an existing life insurance policy, annuity contract, pension, profit-sharing plan or other contractual arrangement providing for payment to the spouse if it is the intention of one of the parties to keep or change the other party as a beneficiary.” In other words, HB 875 requires a divorce decree or an annulment of marriage to include a provision informing the parties to update the beneficiary status on an existing life insurance policies/retirement accounts. If a party fails to change beneficiary designations, this failure may result in the revocation of the designation.
If you have a question about Act 875, contact your legal counsel or one of the Family Law attorneys at KingSpry.