Well, it’s happens to lots of marriages these days. Half in fact. Staggering numbers but it is reality.
Through the divorce process you may have forgotten about your superannuation and insurance beneficiaries. Or you made a knee-jerk change to your beneficiaries. “If I go, he’s not getting my money!” You certainly wouldn’t be alone in this thought – in fact, it’s the exact decision most people make! Or you might have even cancelled your policy.
There is no wrong or right in this situation, but there are things to consider.
Most people make their children the beneficiary. This is fine, providing you have an up-to-date will that will establish how the money is to be dealt with. Establishing a trust for the children is good, however a contingency needs to be considered that this trust money can be withdrawn to maintain living standards or education in the future. The last thing you want is to leave your benefit payment to your children and them not be able to access any of it until a certain age.
Example: your will states the children get access to their funds at age 21. Great idea, right? They’ll be sensible by then and won’t waste it. But what if they want to study when they finish high school? They’re only 18 then. It would make sense that they can draw on those funds immediately if it’s required. This needs to be written into the will.
Another alternative is trusting in your ex-spouse to make the right decisions for your children, therefore leaving them as the beneficiary. This does pose some risk though in the event that your ex enters another relationship, and can get further complicated if that new partner also has children. No one wants part of your children’s money going to your ex-spouses new step child!
A third consideration is that you can take out an insurance policy on your ex-spouse (that you pay for), assuming the spouse agrees to the application. This is another way to protect yourself and your children if you’re unsure of your ex’s beneficiary nominations and structure.
It’s a minefield working out the best scenario, and it is best left to professional financial advisers if you are at all concerned.