I am in the middle of a divorce from my husband after twenty-three years. I am a named beneficiary on his life insurance policy. Will I continue to be the beneficiary after divorce?
November 1, 2018
Based on your question and if nothing is done to change the designation prior to divorce, no, you will not continue to be the beneficiary.
In years past if a spouse remained on a life insurance policy, then the ex spouse remained as the beneficiary even if the owner remarried. I was always careful to counsel estate planning clients concerning this. It is still a counselable issue for my clients. In the Code of Alabama, 1975, §30-4-17 (2016 law) the opposite effect occurred in that there is a “revocation of certain transferable interests in property upon divorce or annulment”. Only (h) says The provisions of this section shall not apply to any insurance policy for which the former spouse is named beneficiary, if the former spouse is listed as owner of the policy or makes premium payments on the policy following the divorce or annulment. So should your divorce proceed as is with no mention of the life insurance fund designation you will not be a beneficiary to the proceeds should your husband pre-decease you.
The United States Supreme Court made a determination based on that very matter in June of this year, in Sveen, et al. v. Melin. The case arose from a Minnesota appellate case. The state of Minnesota had passed in 2002 a law similar in effect to the Alabama law of 2016 regarding revocation-on-divorce. Mark Sveen and Kaye Melin married in 1997. Sveen had two children from a prior marriage. The marriage ended in 2007 and Sveen died in 2007. Both the Sveen children and Melin sought the benefits of the life insurance policy; Melin because the policy beneficiary was never changed and the Sveen children based on the 2002 Minnesota law. While the District Court awarded the money to the Sveen children, the 8th Federal Circuit reversed and held that the retroactive part of the Minnesota revocation law violated the Minnesota Contracts Clause.
Justice Kagan wrote the majority opinion for the United States Supreme Court holding that the Contracts Clause was not violated and that the divorce court could have certainly included an order that the life insurance policy retain former wife, Melin as the beneficiary, sole or otherwise. The life insurance policy was not addressed in the divorce. Justice Kagan went on to point out that with a Last Will and Testament, a divorced spouse is treated as if they had predeceased the deceased spouse, barring any gift through the Will. In that sense an instrument (i.e. life insurance, etc) that is Will-like should also bar a former spouse from receiving assets. Alabama treats a former spouse in a Will as if they have predeceased the decedent.
I have had both acquaintances and clients who have either continued to live with their former spouse after divorce or even to remain friendly enough to want to continue to include their former spouse in their Will or on a life insurance policy. Often, even without a Court order someone having no other beneficiaries to name, may name a former spouse with whom they have minor aged children as beneficiary mainly to make sure the children have adequate resources after their death.
Justice Gorsuch dissented from the majority opinion and brought up some interesting and even compelling arguments.
Respectfully, I cannot agree. Minnesota’s statute automatically
alters life insurance policies upon divorce to remove a former
spouse as beneficiary. Everyone agrees that the law is valid when applied
prospectively to policies purchased after the statute’s enactment. But
Minnesota wants to apply its law retroactively to policies purchased before
the statute’s adoption. The Court of Appeals held that this violated the
Contracts Clause, which guarantees people the “right to ‘rely on the
law . . . as it existed when the[ir] contracts were made.’” Metropolitan
Life Ins. Co.v. Melin, 853 F. 3d 410, 413 (CA8 2017) (quoting Whirlpool
Corp.v. Ritter, 929 F. 2d 1318, 1323 (CA8 1991)). That judgment seems to me exactly right.
Furthermore, he said,
So when a state alters life insurance contracts by undoing their beneficiary
designations it surely “substantially impairs” them. This Court has already
recognized as much, holding that a law “displac[ing] the beneficiary
selected by the insured . . . and plac[ing] someone else in her stead . . .
frustrates” a scheme designed to deliver proceeds to the named beneficiary. Hillman v.
Maretta, 569 U. S. 483, 494 (2013) (quoting Wissner v. Wissner, 338 U. S. 655, 659
(1950) (internal quotation marks omitted)). As Justice Washington explained long ago,
legislation “changing the objects of [the donor’s] bounty . . . changes so materially the terms
of a contract” that the law can only be said to “impair its obligation.” Trustees of Dartmouth
College v. Woodward, 4 Wheat. 518, 662 (1819) (concurring opinion). Just so. Cases like
ours illustrate the point. Kaye Melin testified that, despite their divorce, she and the
decedent, Mark Sveen, agreed (repeatedly) to keep each other as the primary
beneficiaries in their respective life insurance policies. Affidavit of Kaye Melin in No. 14–
cv–05015, Dkt.No. 46, ¶¶3, 4, 0– 14. Ms. Melin noted that they adopted this arrangement
not only because they remained friends but because they paid the policy premiums from their joint checking account. Deposition of Kaye Melin in No. 14–cv–0515, Dkt. No. 45–4, pp.
26–27, 64–65. Of course, we don’t know for sure whether removing Ms. Melin as beneficiary
undid Mr. Sveen’s true wishes. The case comes to us after no one was able to meet
Minnesota’s clear and convincing evidence standard to prove Mr. Sveen’s intent. But what we
do know is the retroactive removal of Ms. Melin undid the central term of the contract Mr.
Sveen signed and left in place for years, even after his divorce, until the day he died.
For big life changes and/or every few years consider the change in family dynamics (death, divorce, irresponsible adult children, etc.) and make sure that all of your legal documents, life insurance, trusts, annuities, investments, etc. fit your goals. Any desire to include a former spouse in a Will or financial bequest must say so plainly.
This article is informative only and not meant to be all inclusive. Additionally this article does not serve as legal advice to the reader and does not constitute an attorney- client relationship. The reader should seek counsel from their attorney should any questions exist.
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