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Divorce-related beneficiary question works its way up to SCOTUS

Here’s a hypothetical — actually a real-life situation that occasionally plays out for divorced spouses across the country — relevant to beneficiary designations in life insurance policies.

Imagine that one spouse lists his or her married partner as a beneficiary (a common outcome, obviously). The couple later divorces, but the policyholder fails to remove the former spouse as a beneficiary. When it comes time later in life to make payment under the policy, the ex-spouse, currently widowed partner and adult children all make claims on the money.

Who prevails?

That can make for a sticky question regarding a revocable insurance policy, especially when evidence suggests that a policyholder simply forgot to remove a former spouse as beneficiary under a policy and never intended for that person to collect any money from it.

The United States Supreme Court recently decided to take a case addressing that subject, following one state’s legislative decision to automatically revoke a spousal beneficiary designation upon marital dissolution. In that state, a man who divorced his wife failed to remove her as a beneficiary. Following his death, she and his adult children both made policy claims.

The specific question the high court is considering is whether a designation in a policy predating such a legislative determination can be retroactively revoked or stands independently as a validly executed contract?

The court is stepping in following a federal appellate court’s ruling that reversed an earlier court outcome in favor of the children in its decision to let the former wife collect.

The case will certainly be watched with interest by family law commentators across the country. As one media report on the matter notes, many states have “revocation-upon-divorce” statutes that bar ex-spouses from making beneficiary claims.

Any New Jersey resident seeking clarification of the current law in New Jersey can contact an experienced Middlesex metro area family law attorney.



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