Category: Life Insurance
Life insurance lawyer meeting with client

Life Insurance Beneficiary Rules for Spouses and Ex-Spouses After Divorce

Current spouses and often ex-spouses are often named life insurance beneficiaries by an insured. However, when they are not, there are circumstances under which they are still entitled to some or all of the death benefit.

If your spouse or ex-spouse died, had life insurance, and did not name you as beneficiary, you may still have a right to some or all of the death benefit depending upon the circumstances. 

If you are an ex-spouse and your life insurance claim was denied, you may still be paid. If your spouse or ex-spouse named you as beneficiary and someone is disputing that, you may still be paid.

Whether you are the named beneficiary or believe you should be, call us for your free, no-obligation case evaluation. Our life insurance claim attorneys help people in your position get paid the life insurance death benefits to which they are entitled by law. 

In Community Property States, a Spouse is Entitled to Life Insurance Regardless of Who is Named Beneficiary

Can a spouse override a beneficiary on a life insurance policy? Sometimes. It depends on where you live.

Most states are “equitable distribution” or “equitable property” states in which spouses who divorce are not automatically entitled to a 50-50 split of marital property. Instead, marital assets are divided “equitably,” meaning fair but not necessarily equal.

In the nine so-called “community property” states, each spouse is entitled to 50% of the marital property. This means that if an insured paid life insurance premiums with income earned during the marriage, their spouse is entitled to one-half of the death benefit regardless of who is named as the beneficiary on the policy.

The community property states in the U.S. are:

  • Arizona
  • California 
  • Idaho 
  • Louisiana 
  • Nevada
  • New Mexico
  • Texas
  • Washington 
  • Wisconsin

Alaska is called an “opt-in” state because it is an equitable property state but has a law allowing couples to choose community property rules. They do this by executing a legally-binding community property agreement or a community property trust. Couples may enter into community property agreements or trusts either before or during their marriage.

How to Exclude a Spouse as Life Insurance Beneficiary 

In community property states, spouses can execute a “property status agreement” that gives them the legal, binding ability to exclude their life insurance from marital property and effectively name someone other than their spouse as beneficiary. In this case, the spouse or former spouse of the insured will have no right to the death benefit if they are not named as beneficiary.

In equitable distribution states, a policyholder who is married can name whomever he wants as his life insurance beneficiary. However, if the insured is under court order to maintain life insurance to protect child support, spousal support or alimony, he must name his former spouse, the support obligee, as beneficiary. If he does not, his policy will likely be the subject of a beneficiary dispute in which the support obligee will likely prevail.

When it is Necessary to Keep an Ex-Spouse As Your Beneficiary

Does a Divorce Decree Override a Named Beneficiary in Life Insurance? Yes!

There are circumstances under which an insured must name their former spouse as beneficiary to their life insurance policy. This is generally done to protect spousal support or alimony, child support, or pension or retirement funds, and is ordered by a family law judge as part of the property settlement agreement during divorce proceedings. 

If the support obligor (payor) fails to maintain life insurance, the court frequently allows the support obligee (recipient) to maintain life insurance on the ex-spouse and adds the premium payment to the amount the obligor pays.

If an insured fails to comply with the court order and names someone other than the former spouse as beneficiary, the ex-spouse may have grounds for a beneficiary dispute. If you are in this position, call us:  we can help you get paid.

The Danger of Failing to Update the Beneficiary in Case of Divorce

Half of all states have “revocation-upon-divorce” statutes that automatically revoke an ex-spouse’s designation as life insurance beneficiary upon divorce. The states that have revocation-upon-divorce statutes are:

  • Alabama
  • Alaska
  • Arizona
  • Colorado
  • Florida
  • Hawaii
  • Idaho
  • Iowa
  • Massachusetts
  • Michigan
  • Minnesota
  • Montana
  • Nevada
  • New Jersey
  • New Mexico
  • New York
  • North Dakota
  • Ohio
  • Pennsylvania
  • South Carolina
  • South Dakota
  • Texas
  • Utah
  • Virginia
  • Washington
  • Wisconsin

Note that a 2018 Supreme Court decision captioned Sveen v. Melin held that it is constitutional to retroactively apply a revocation-upon-divorce statute to exclude a former spouse as beneficiary, where the insured purchased the policy four years before the statute was enacted.

When Life Insurance is Ordered to Protect Support Payments or Pension/Retirement Proceeds

In states that have automatic revocation, an insured can comply with a court order to name a support obligee as beneficiary by completing a new beneficiary designation form following the divorce redesignating the former spouse as beneficiary.

It is Important to Update Your Beneficiary Designation After Divorce

Not every state has an “automatic revocation” statute. If you live in one of those states, you should still update your life insurance to reflect your current wishes. Few divorced people want their ex to receive a windfall upon their death!

How to Find Out if Your Spouse or Ex-Spouse Had Life Insurance

An insured should always inform their beneficiaries that they have a life insurance policy, but if the insured failed to do so and you suspect there was a policy in effect, do the following:

  • Ask Employers & Financial Professionals 
  • Check Old Bills and Mail for Premium Payments
  • Review Tax Returns for Evidence of Premium Payments
  • Contact Your State’s Insurance Department for Information

If Your Spouse or Ex-Spouse Had a Life Insurance Policy and You are Not the Named Beneficiary, Call Us

Our life insurance lawyers have helped spouses and ex-spouses in every state get the life insurance proceeds to which they are entitled, regardless of who is named as beneficiary. We know how the law works in your state, and we can help you, too. Contact us to schedule your free consultation today.

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Why Would a Life Insurance Policy Need Probate Papers?

Does a Life Insurance Policy have to go through Probate?

Generally speaking, no.

Usually, life insurance death benefits are paid out directly from the insurer to the beneficiary or beneficiaries without going through probate. Life insurance is not part of the insured’s estate and is not subject to debt collection, payment of the insured’s bills, or taxation as inheritance.

However, there are circumstances under which the death benefit from a life insurance policy is transferred to the insured’s estate rather than to a beneficiary. Under these circumstances, the life insurance proceeds will be subject to the probate process.

Having trouble with your life insurance claim because of a vague, invalid, or out-of-date beneficiary designation? Are you an ex-spouse entitled to the life insurance death benefit? Do you think you should be the beneficiary of an employer-provided life insurance policy? Call us for your free, no-obligation case evaluation.

Are life insurance proceeds considered part of an estate?

No. Life insurance death benefits pass to beneficiaries by operation of state law, not through the insured’s estate. Are life insurance proceeds public record? No.

How do life insurance proceeds end up in the decedent’s estate?

When is Life Insurance Part of the Estate?

When there is an invalid or out-of-date beneficiary designation, or the designated life insurance beneficiary is deceased or cannot be found, the life insurance company pays the death benefit to the estate of the insured.

What happens when life insurance goes to the estate?

When there is no beneficiary on a life insurance policy, the life insurance beneficiary rules dictate that the death benefit will be subject to the probate process.

“Probate” refers to the process by which a deceased individual’s estate is distributed. The executor uses the deceased’s will to determine who are the beneficiaries entitled to a portion of the insured’s estate. If the deceased had no will, the estate is distributed according to the state’s laws of intestacy.

Unlike the process of claiming the death benefit as a beneficiary, which is streamlined and private, the probate process varies greatly state-to-state basis and is a matter of public record. And especially in the case of high-value estates, probate can be a heavily-litigated process, with multiple parties claiming conflicting amounts of the deceased’s assets.

Is the beneficiary of life insurance responsible for debt? Can life insurance proceeds be taken by creditors?

No, and this is one of the reasons going through probate is disadvantageous even if the estate value ends up being distributed appropriately.

If the insured was in debt at the time of death, their estate will first be used to pay off any outstanding debts. When the remains of the estate is distributed to the insured’s heirs, those proceeds may be subject to estate taxes. In contrast, if a beneficiary receives the insured’s death benefit directly from the insurance company, the beneficiary will receive the full amount without debt collection or tax collection.

Many states exempt a specified amount of life insurance death benefits (e.g. up to $50,000) from debt and/or tax collection even after the death benefits are transferred to the insured’s estate, but this depends on the laws in your state.

How an Insured Can Avoid Leaving the Death Benefit to Their Estate

It is in everyone’s best interests that an insured keep their beneficiary designations as up-to-date as possible to avoid probate, debt collection, creating a public record, and possible estate tax.

Designating multiple life insurance beneficiaries such as more than one primary beneficiary or a secondary or contingent beneficiary can provide an effective safeguard in case something happens to a primary beneficiary.

National Beneficiary Lawyer to Help You With Your Life Insurance Claim

Unfortunately, when there is a vague, invalid, or out-of-date beneficiary designation, or if the named beneficiary is deceased, there is frequently litigation over who is rightfully entitled to the policy’s death benefit. This litigation is called a life insurance beneficiary dispute. If the court determines that none of the litigants are rightful beneficiaries, the death benefit goes to the insured’s estate.

If you believe your life insurance claim has been wrongfully denied or that you are entitled to a death benefit that seems to be going to the estate instead, you need the advice of an experienced life insurance beneficiary lawyer. Call us – we get our clients paid!

Quick Tips for Buying Life Insurance (video)

The terms of your policy could be life-altering for your loved ones.

Insurance is something of a mystery to many of us.  What are the different kinds of coverage out there?  How much coverage do you need?

This video gives a few good rules of thumb:

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