Sometimes a divorce decree will override a previously named beneficiary on a life insurance policy. It depends upon what state and federal law controls the life insurance policy and whether the policyholder was married in a community property state or not.
Learn from the nation’s top life insurance lawyers how divorce may affect a life insurance beneficiary designation. If your spouse or ex spouse had life insurance and died and you believe you should be the beneficiary, call us to discuss your case. We have helped clients across the country get the life insurance payout they are entitled to.
What does divorce mean for life insurance beneficiaries?
Laws that govern divorce, also known as family law, vary from state to state. Beneficiaries of a life insurance policy may be the spouse from whom you are separating, as well as your children. The general rule is that in many states divorce does not affect a beneficiary designation in a life insurance policy, however, in some states it does. Read on to find out how.
Life Insurance Beneficiary Rules After Divorce
Many states have revocation-upon-divorce laws that eliminate an ex-spouse as a policyholder’s beneficiary automatically upon divorce. This means that a policyholder must designate someone else as the beneficiary. Otherwise there will be no named beneficiary if the policyholder dies, the death benefits may pay to the estate.
Under most circumstances, a named beneficiary receives the life insurance payout even if the policyholder’s will says otherwise. However, certain legal situations may change that. These situations include:
- If the insured was married in a community property state
- If the insured failed to change the beneficiary designation after divorce in a revocation upon divorce state
- If the insured changed an irrevocable beneficiary designation
- If the insured named someone other than the beneficiary designated by court order
If any of these apply to your spouse or ex-spouse and you think you should be their life insurance beneficiary but are not, call us — we may be able to help you.
Can a Divorce Decree Override a Named Beneficiary in a Life Insurance Policy?
Yes. There are certain circumstances when a divorce decree will override a previously named life insurance beneficiary. If the policyholder was married in a community property state and got divorced, the ex-spouse may be entitled to some of the death benefit regardless of who is the named beneficiary.
Also, if the policyholder is a child support or spousal support obligor, is under court order to name their support obligees as life insurance beneficiaries, and fails to do so, those support obligees may be entitled to the death benefit regardless of who is the named beneficiary.
In either of these cases, the people who believe they should be the named beneficiaries but are not must file an interpleader and contest the beneficiary designation. Beneficiary disputes are notoriously difficult to win. Call us for help if you need to dispute a beneficiary designation.
States that Revoke a Person’s Life Insurance Beneficiary Rights Following Divorce
As of this writing, the following states have some form of revocation-upon-divorce statute that automatically removes an ex-spouse as a life insurance beneficiary after divorce:
- Alabama
- Alaska
- Arizona
- Colorado
- Florida
- Hawaii
- Idaho
- Iowa
- Massachusetts
- Michigan
- Minnesota
- Montana
- Nevada
- New Jersey
- New Mexico
- New York
- North Dakota
- Ohio
- Pennsylvania
- South Carolina
- South Dakota
- Texas
- Utah
- Virginia
- Washington
- Wisconsin
How Federal ERISA Law Treats Life Insurance and Divorce
Bear in mind that if the policyholder has group life insurance through their employer, that policy is governed by ERISA which supersedes state law. Under ERISA, a named beneficiary cannot be changed by the act of divorce. Therefore, if a policyholder lives in a revocation-upon-divorce state, names their spouse as their life insurance beneficiary, and then gets divorced, their ex-spouse remains as their beneficiary.
If a policyholder does not wish their ex-spouse to benefit from their death, they must update their group life insurance beneficiary themselves as any state revocation-upon-divorce law has no effect.
Re-Designating a Life Insurance Beneficiary Following Your Divorce
Many revocation-upon-divorce states specify a procedure to redesignate an ex-spouse as a life insurance beneficiary following divorce.
Redesignation is common when the policyholder is a child support obligor or a spousal support obligor and is under court order to name their obligees as life insurance beneficiaries. Beneficiary redesignation ensures that the obligees’ income stream continues upon the policyholder’s death.
Rights to Life Insurance of Divorced Spouses
Someone may be entitled to a portion of their ex-spouse’s death benefits even if they are not named as beneficiaries on the life insurance policy.
In community property states, income earned during the marriage qualifies as community property – meaning, that income belongs to both spouses equally. If the policyholder paid some or all of their life insurance premiums with that income, their ex-spouse may get a prorated portion of the life insurance payout even if someone else is the designated beneficiary.
Impact of Divorce on Life Insurance Beneficiary Designations
You may not be able to change beneficiaries if the divorce is still pending and court orders prohibit parties from conveying or disposing of property. If the separation agreement says divorce cancels the ex-spouse’s right to life insurance proceeds, the ex-spouse won’t have any claim even if a new beneficiary isn’t named.
The contingent beneficiary can receive the proceeds if the primary beneficiary is no longer eligible unless the policy states otherwise. If there are no specific terms, the contingent beneficiary is entitled to the proceeds after the divorce.
Talk with an Experienced Life Insurance Lawyer
We have experience in every state in the nation, as well as with working under federal ERISA law, helping life insurance beneficiaries and those who are otherwise entitled to some of the death benefits get their due. Let us help you too.
