Revocation Upon Divorce in Life Insurance Policies: A Comprehensive Analysis

The Supreme Court’s ruling in Sveen v. Melin has pivotal implications for life insurance policies in divorce. This article, crafted by a life insurance lawyer, aims to elucidate these implications for potential claimants.

Understanding Sveen v. Melin

The case underscores the ‘revocation upon divorce’ doctrine, which automatically revokes an ex-spouse as a beneficiary post-divorce. This reflects an assumption about the policyholder’s intent after their marital status changes.

Legal Landscape and Implications

This ruling aligns with many states’ laws, presuming that the divorced policyholder would not want their ex-spouse to remain as a beneficiary. It protects policyholders’ interests but also necessitates awareness and proactive management of their policies.

Exceptions and Considerations

While the doctrine is generally applied, there are exceptions. Situations where the divorce decree explicitly states otherwise, or where the policyholder reaffirms the ex-spouse as a beneficiary post-divorce, can lead to different outcomes. There are also considerations if the policy is an ERISA, FEGLI or other federally regulated policy, or where the policy owner is the former spouse.

Importance of Updating Beneficiary Designations

Policyholders must actively review and update their beneficiary designations following divorce. Failing to do so can result in unintended consequences and legal complexities.

Exceptions to Revocation Upon Divorce Statutes

The Florida Statute 732.703, for example, discusses the effect of divorce, dissolution, or invalidity of marriage on the disposition of certain assets at death. It specifies how assets are handled upon the death of a person in relation to a former spouse, particularly focusing on situations where the former spouse is designated to receive benefits or interests. The statute details various conditions and exceptions to how these assets are distributed or affected by the dissolution of marriage. For a comprehensive understanding of the statute, you can read the full text here.

In Florida, under Statute 732.703(4), the automatic revocation of an ex-spouse as a beneficiary upon divorce does not apply in certain situations. These exceptions include cases governed by federal law, explicit post-divorce agreements favoring the ex-spouse, specific will or trust provisions, orders mandating asset maintenance for an ex-spouse or children, irrevocable beneficiary designations, and several other conditions. This law outlines specific scenarios ensuring that the revocation rule is applied appropriately, considering various legal contexts and agreements. For more details, visit Florida Statute 732.703(4).

For example, revocation upon divorce may not apply to:

(a) To the extent that controlling federal law provides otherwise;

(b) If the governing instrument is signed by the decedent, or on behalf of the decedent, after the order of dissolution or order declaring the marriage invalid and such governing instrument expressly provides that benefits will be payable to the decedent’s former spouse;

(c) To the extent a will or trust governs the disposition of the assets and s. 732.507(2) or s. 736.1005 applies;

(d) If the order of dissolution or order declaring the marriage invalid requires that the decedent acquire or maintain the asset for the benefit of a former spouse or children of the marriage, payable upon the death of the decedent either outright or in trust, only if other assets of the decedent fulfilling such a requirement for the benefit of the former spouse or children of the marriage do not exist upon the death of the decedent;

(e) If, under the terms of the order of dissolution or order declaring the marriage invalid, the decedent could not have unilaterally terminated or modified the ownership of the asset, or its disposition upon the death of the decedent;

(f) If the designation of the decedent’s former spouse as a beneficiary is irrevocable under applicable law;

(g) If the instrument directing the disposition of the asset at death is governed by the laws of a state other than this state;

(h) To an asset held in two or more names as to which the death of one coowner vests ownership of the asset in the surviving coowner or coowners;

(i) If the decedent remarries the person whose interest would otherwise have been revoked under this section and the decedent and that person are married to one another at the time of the decedent’s death; or

(j) To state-administered retirement plans under chapter 121.

Navigating Post-Divorce Policy Management

Understanding the nuances of life insurance policies post-divorce is often crucial. Policyholders should consult legal experts to navigate these changes effectively.

Conclusion

Sveen v. Melin highlights the critical intersection of life insurance and divorce law. It emphasizes the need for policyholders to be vigilant about their life insurance plans, especially following significant life changes like divorce.

For a detailed understanding of the case and its implications, please refer to the Supreme Court’s opinion.