Life Insurance Ex Spouse Beneficiary – Designating a life insurance beneficiary is one of the few decisions in the life insurance approval and approval process that is completely under your control. The choice of recipient is entirely at your discretion, with no restrictions from the insurance company. While most policyholders generally buy life insurance out of financial responsibility and a desire to protect their loved ones, the decision of who to leave the money to is entirely in their hands.
While your heart may be in the right place if you want to name a minor child, this is the only restriction that insurance companies place on the designation of life insurance beneficiaries. Some companies will not allow you to name them directly on the policy.
Life Insurance Ex Spouse Beneficiary
If you don’t have a beneficiary designated to receive the life insurance proceeds, your estate will automatically become the beneficiary upon your death. Estate planners don’t recommend this as a general rule for tax reasons and because your heirs will have to wait through the tedious probate process to settle your debts and will likely lose some of the payout to creditors. That’s why financial experts caution you to choose a person(s) as the named beneficiary of the policy and keep the insurance proceeds out of court.
Divorce And Beneficiary Designations — Florida Statutes §732.703
Listing “husband”, “wife” or “wife” as a beneficiary will not be drastic. This is a legal contract between you and the insurance company that the carrier must honor by paying the right person after your death. Designating a life insurance beneficiary on your policy even supersedes your last will and testament. Avoid future legal battles between your ex and current spouse by naming a beneficiary in your life insurance designation. In addition to the person’s contact information, you must also include their birth number and social security number.
Distribution methods you can specify in your policy to determine how you want the death benefit to be divided between more than one beneficiary:
The most important thing to remember throughout this explanation of how and why to designate a life insurance beneficiary is that you have the power and control over your choices. But don’t take it for granted. Other important points to remember:
You are investing good money to protect the future of the people to whom you will leave this financial legacy. Make sure they are prepared with the necessary knowledge and information to one day truly benefit from this gesture of love. Very often in our practice, questions arise about the rights of ex-spouses to the life insurance of the deceased ex-spouse. This area of the law can be quite confusing, so to help you understand the legal complexities involved in the claim process, our lawyers will explain everything you need to know about issues related to life insurance beneficiaries and divorce settlements.
Wills, Trusts & Life Insurance After Divorce: A Breakdown Of Current Md/dc/va Laws
There is no universal rule about who gets life insurance after a divorce. Factors such as the type of policy, the state where the policy was issued and where the couple lived, and the language of the divorce decree will come into play when it comes time to pay out life insurance benefits.
The main thing is that the law governs. First, you must determine whether the policy is governed by state law or federal law. Many states have passed laws stating that an ex-spouse automatically loses designation as a beneficiary on life insurance policies. Policies governed by federal law that retain designations of former spouses are not automatically revocable. Second, the divorce decree must be analyzed to determine whether it falls within the definition of a qualified domestic relations decree. Finally, in beneficiary disputes, the circumstances of the beneficiary change must be examined to ensure that there was no undue influence or fraud. All of these preliminary steps must be taken to properly manage competing demands.
Yes and no. A divorce decree can remove a beneficiary designation on a life insurance policy only if the divorce decree (usually a state court order) does not prevail under the laws governing the life insurance policy itself. Certain federal laws governing federal life insurance policies may prevail over conflicting state laws, including divorce decrees.
For example, if an insured had a Servicemembers Group Life Insurance (SGLI) policy controlled by such federal law and named his parents as beneficiaries, the parents will receive benefits even if there is a divorce decree requiring the insured to support his ex-spouse as a beneficiary under the SGLI policy . The determination of the SGLI beneficiary in favor of the parents in this case trumps the conflicting divorce decree, which states that the beneficiary must be the ex-spouse. To learn more about your ex-spouse’s SGLI death benefit rights, read our article on SGLI and Divorce. If SGLI became VGLI, read about VGLI and divorce.
Everything You Need To Know About Disputing A Life Insurance Beneficiary
Similar problems can arise with Federal Employees Life Insurance (FEGLI) policies. You can read more about a former spouse’s rights to FEGI benefits in our blog post on FEGLI and Divorce.
ERISA policies, which govern most employer-provided life insurance plans, work differently. If the divorce decree contains all the information required for a qualified domestic relations order (QDRO) under ERISA, the proceeds of the deceased employee’s life insurance policy will go to the person named in the divorce decree, rather than to his named beneficiary.
ERISA was amended in 1984 to provide greater protection for spouses and dependents after divorce. One such defense was an exception to the general preemption rule for qualified domestic relations orders (QDROs). A QDRO is a government divorce order/decree that deals with alimony, spousal property rights, or alimony. To be valid, it must meet several requirements. During a divorce, it is important to consult with a life insurance attorney to avoid conflicts later. Recovering life insurance benefits after they have been transferred to the wrong party can be difficult and can lead to lengthy litigation.
As a federal law, ERISA takes precedence over any state law. This means that if the state where the decedent lived has auto-cancellation laws, the ex-spouse may still be eligible for life insurance death benefits. Learn more about the ERISA preemptive exemption.
What Is A Life Insurance Beneficiary?
Learn more about your ex-spouse’s rights to ERISA death benefits in our blog post on ERISA’s Lifetime Beneficiary Designation Rules.
It is not uncommon for divorced people to forget to update their beneficiaries on their life insurance policies and name their former spouses as the primary beneficiaries. To avoid situations where ex-spouses accidentally benefit from their deceased ex-spouse’s policies, many states have enacted laws that automatically remove the ex-spouse as the beneficiary of a life insurance policy after a divorce. These laws were designed to prevent conflict between families and limit litigation over controversial policies.
The divorce annulment statute means that if a divorced policyholder never updated their beneficiary by contacting the insurance company and following its beneficiary change procedure, the ex-spouse will not be able to receive benefits after the policyholder’s death. So, even if you forget to renew your life insurance policy after a divorce, your ex-spouse may still be able to void it under state law. There are two potential problems with such laws.
First, if the ex-spouse is automatically removed as a beneficiary, it does not mean that the person the policyholder would have made the beneficiary will actually receive the money. Sometimes the insurance company will pay the secondary beneficiary (if any) or the insured’s estate. Sometimes an insurance company will follow a priority table in their own policy to name the next in line to receive payment. Another problem with using such laws is that they do not control all life insurance claims. Many life insurance claims are governed by federal laws that supersede state laws.
Why You Should Buy Life Insurance For Your Co Parent Or Ex Partner
Although such laws are enacted to protect the wishes of the insured, they do not guarantee that your particular claim will be covered by the laws. There are exceptions to these laws, such as if there is a current beneficiary maintenance agreement between the ex-spouse, there is a divorce decree naming the ex-spouse, or the insured reinstates their ex-spouse as the beneficiary. In states that have not adopted dissolution statutes, a former spouse who remains on the policy may have a valid claim for benefits upon the death of the insured.
If the insured created a will or trust after the divorce and included his life insurance in it, but did not notify the beneficiary of the policy, the existing beneficiary may have a valid claim to the life insurance proceeds after the insured’s death. The situation can be even more complicated if the life insurance policy is a group policy and is subject to federal law. To avoid potential problems and confusion, we recommend that anyone going through a major life change, such as a divorce, consult with an experienced life insurance attorney to help them navigate the ins and outs of life insurance law and protect their rights.
Over the years of practicing life insurance, we have noticed that many divorcing couples do not include their life insurance policies in
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