The U.S. Supreme Court recently issued an important ruling that granted the ex-wife of a deceased federal worker the proceeds of his life insurance rather than his current wife at the time of his death. The government employee had designated his ex-wife as his life insurance policy beneficiary on the required forms two years before the couple obtained a divorce.
The problem for the man's widow, who understandably felt that she, and not the ex-wife, deserved to receive the life insurance payout, was that he had neglected to ever fill out a new beneficiary designation naming his new wife as the designated beneficiary of the policy. He may have mistakenly assumed his divorce and subsequent remarriage somehow automatically took care of this, but he was wrong.
Now, a check for $124,558 will be deposited in the mail to his ex-spouse, who has not been his wife since 1998, a full ten years before his death. That is the result despite a state law mandating the life insurance proceeds should be paid to the new wife. The U.S. Supreme Court ruled a federal law that created the Federal Employees' Group Life Insurance entity (FEGLI) preempted any conflicting state law. The Justices unanimously, by a vote of 9-0, sided with the ex-wife.
The federal law establishes clearly, the Supreme Court held, that the formal declaration of a beneficiary was binding, and the only way to alter who the proceeds would go to would have been to fill out a new beneficiary designation form. While the ruling only applies to the specific life insurance program provided for federal employees, the cautionary tale is clear.
Those obtaining a divorce should make sure that designated beneficiaries are changed on any existing life insurance policies if they would not want their ex-spouse to receive the proceeds in the event of their death. An experienced divorce attorney can remind divorcing clients of this and other important tasks to take care of following the finalization of the divorce.
Source: FederalTimes.com, "Ex-wife, as beneficiary, should get FEGLI benefits, high court rules" Stephen Losey, Jun. 07, 2013