April 23, 2013
The case: Husband died in 2008, leaving a life insurance policy purchased in 1996 with his former wife still listed as beneficiary. Although Husband and ex divorced in 1998 and Husband remarried in 2002, he never changed the beneficiary of his policy. Current wife sued in Virginia where State law automatically revokes a divorced spouse as a life insurance beneficiary in favor of the widow or widower. Lower court awarded the insurance proceeds to the widow, but the Virginia Supreme court reversed. The policy had been obtained through a federal insurance program and the court held that federal law, not state law governs. Benefits therefore reverted to the original beneficiary – - the ex-wife.
Status: This case is now on appeal to the US Supreme Court. Widow is arguing that the State, not the federal government, should govern domestic relations issues. Arguments will be held before the court on April 29, 2013. Look for a decision in the months to come.
Moral: NJ has no law automatically revoking the former spouse as a beneficiary of life insurance or any other accounts. And the moral of the story is clear. Beneficiaries on life insurance policies, financial and retirement accounts should always be updated after a divorce. And a new Will should be drafted. The entry of a divorce should be the catalyst to update your financial life and documents. Otherwise, the intended beneficiary may not receive the funds as intended.
For more information about divorce or to set up a consultation, please contact Risa A. Kleiner, Esq. at 609.951.2222.