What does divorce mean for life insurance beneficiaries?

Laws that govern divorce, also known as family law, vary from state to state.  Beneficiaries of a life insurance policy may be the spouse from whom you are separating, as well as your children.  The general rule is that divorce does not affect a beneficiary designation in a life insurance policy.  

Will your spouse still be a beneficiary?

If your spouse is a beneficiary some states recognize a legal doctrine called an automatic revocation by implication.  That is, benefits that the divorced parties had previously received or could receive by virtue of their union is revoked.  

If there is an express provision in the deceased’s will or otherwise that states a divorce order will not revoke rights that the spouse had in an insurance policy, then this automatic revocation is less likely to be effective.

Will your spouse’s dependents be beneficiaries?

 Some choose to appoint irrevocable beneficiaries in insurance policies so that the divorced party has funds to support dependents after separation. This designation is sometimes given as a part of a separation agreement or divorce settlement.

 The details of such a term, if later there is controversy, may be resolved in court. In some states, if the deceased had wished the ex-spouse to remain a beneficiary after divorce, he would have to rename the ex-spouse as the beneficiary after divorce.

Because most insurance policies retain the contractual right to change beneficiaries at any time, there is no legal right on the part of the beneficiary to the legal proceeds.  If there is a separation agreement or prenuptial agreement in place that requires a spouse to have life insurance, there is a legal right in the proceeds of the policy based on contract.  

If the divorce is still pending, and there are court orders prohibiting parties to convey or dispose of property, changing beneficiaries might not apply to the prohibition.  

If in the separation agreement between two parties, a term states that divorce will eliminate any right or interest the ex-spouse has to life insurance proceeds, then the failure of the deceased to designate a new beneficiary will not render the term inoperable:  the ex-spouse will still have no interest.

The contingent beneficiary to your life insurance policy is still entitled to receive proceeds in the case that the primary beneficiary (the ex-spouse) is no longer entitled.  However, if there is a manifestation of intent on the part of the insured that the contingent beneficiary should not have rights to the proceeds (for example, if there is language in the policy that the contingent beneficiary may only receive proceeds after the death of the primary beneficiary), then the contingent beneficiary may not have access to the proceeds.  In the case where there is no explicit language of preconditions, then the contingent beneficiary will be qualified to receive the proceeds after the divorce.

Questions about life insurance and divorce?

Life insurance is a legal contract and must be evaluated with your specific situation in mind. For a consultation about the legal implications of divorce on your insurance policies, call the offices of Boonswang Law at  (215) 940-8900 or visit their website.