State Law Will Not Help Out In All Divorce Situations

more+
less-

Many states, including Florida, automatically terminate former spouses as beneficiaries under life insurance policies, annuities, and other beneficiary-designated accounts upon divorce. This avoids a former spouse receiving testamentary benefits simply because their divorcing spouse forgot to, or never got around to, changing beneficiary designations after divorce.

The U.S. Supreme Court issued a recent opinion that overrode such a statute in Virginia in regard to federal life insurance under the Federal Employees’ Group Life Insurance program. Based on the supremacy of federal law over state law, the former spouse beneficiary designation under the program could not be changed by the Virginia statute. Instead, the former spouse could be removed only through a formal change of beneficiary by the insured spouse.

Under this analysis, state statutes that change beneficiaries at divorce are unlikely to have any effect in regard to other federal accounts and plans, such as pension plans. Thus, divorcing spouses should not rely on state statutes in this regard, and will need to submit change of beneficiary forms upon divorce for these federal items.

Interestingly, Virginia anticipated that its law might be pre-empted, so it tried an end run around pre-emption. It enacted a statute that provides if the change of beneficiary statute is pre-empted, then the former spouse would be liable for the principal amount of the proceeds received by it to the party who would have received them were the statute not pre-empted. The Supreme Court found that such liability “frustrates the deliberate purpose of Congress” in regard to its beneficiary designation scheme, and thus such provision was also found to have been pre-empted.

Hillman v. Maretta, 133 S.Ct. 1943 (2013)

Topics:  Beneficiaries, Beneficiary Designations, Divorce

Published In: Civil Procedure Updates, Conflict of Laws Updates, Family Law Updates, Insurance Updates, Wills, Trusts, & Estate Planning Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Charles (Chuck) Rubin, Gutter Chaves Josepher Rubin Forman Fleisher P.A. | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

CONNECT

Charles (Chuck) Rubin
Gutter Chaves Josepher Rubin Forman Fleisher P.A.

A tax and business attorney who assists clients in preserving & enhancing individual, family &... View Profile »


Follow Gutter Chaves Josepher Rubin Forman Fleisher P.A.:

Reporters on Deadline