Life Insurance Beneficiary Designations matter. Here’s how….
I wrote a blog post within the last year about Florida’s changes to the probate statutes and what happens to beneficiary designations on life insurance or retirement accounts after you go through a divorce. The law holds that, if you die and did not change the beneficiary of your life insurance or retirement accounts from your ex-spouse, the beneficiary designation to the ex-spouse is void, as if the ex-spouse had died before you. Wonderful news, maybe. You don’t have to worry about changing those pesky beneficiary designations?
Well, think again.
In June, 2013, the U.S. Supreme Court found that an ex-spouse was entitled to keep the death benefits of a life insurance policy that the decedent had, even though they had been divorced ten years earlier, AND even though the state where the decedent lived (Virginia) had a law similar to Florida’s stating that divorce or annulment revokes the beneficiary designation as to the ex-spouse. The problem is that the policy was part of federal employee benefits governed by the Federal Employees’ Group Life Insurance Act of 1954 which says that the policy is paid pursuant to the beneficiary declaration. Period.
The U.S. Supreme Court found that the federal law trumps the state law, and that it is up to Congress, not the Court, to change that law.
Moral of the story? Well, there are two. One, don’t wait on Congress to do anything. Two, don’t count on the laws to work for you.
If you have a major life change, have your estate planning reviewed and don’t forget to change your beneficiary designations!