Life Insurance: The Case of the Ex-Wife and the Importance of Changing Your Beneficiary

The Importance of Naming a Beneficiary in Your Life Insurance Policy

Life is an inherently complicated process. Growing up, falling in love, getting married, and in recent times, getting a divorce are all part of life’s cycle. Divorce, as we know, can be a very emotional and difficult time for the individuals involved and their families. When you think of the good times and the bad, and things get to a point where you’ve decided that life would be a happier prospect sent away from someone who was the love of your life, often referred to as your ‘better half’ it’s never an easy decision to make, and the feelings of frustration, anger and emotional turmoil turn your life upside down.

Imagine this; all the assets have been distributed in a satisfactory manner, all legal proceedings completed, and both the husband and the wife have moved on with their lives. Someone else enters the husband’s life after a point in time and he decides to take the plunge again. He’s happy in his new life with his new spouse and everything is going well. Suddenly, he meets with an unfortunate accident which costs him his life. He was a man with foresight, he knew his company had taken out a life insurance policy on his name when he was working there, and his now widowed wife would have nothing to want financially.

Many a times though things don’t pan out like they should. The husband may have forgotten to change the beneficiary on his life insurance policy. His ex-wife is still listed as the beneficiary. What happens then?  Who gets the proceeds from his life insurance policy?

Remember, Federal Insurance Programs Prevails over State Law

One might raise the point that every marital settlement has a waiver clause included, and this is true, but legal precedent indicates that in quite a few cases, a weakly worded marital settlement waiver has allowed the spouse to enjoy benefits of an insurance payout. There is also protection offered by state law for just such instances where oversights or a long lapse in time means the husband/wife have forgotten to have the named beneficiary changed, by means of this protection, the insurance money received goes to the widow not the ex, but this too isn’t completely watertight.

But not all states practice this law. Take for instance the recently concluded Hillman vs. Maretta case that played out in the supreme courts and was all over the news. In this case, Warren Hillman during his tenure as an employee of the federal government cited his then wife Judy Maretta as the named beneficiary in the policy he was a part of in accordance with the Federal Employees’ Group Life Insurance Act (FEGLIA). They divorced a couple of years later, and four years after their divorce, Hillman re-married but forgot to rename his new bride Jacqueline as his beneficiary in the FEGLIA policy.

He died six years after this, his most recent marriage, and Jacqueline assumed she would receive the benefits from his FEGLIA insurance, so imagine her surprise when it went to his ex-wife; Judy Maretta instead. Since she resided in Virginia, she took advantage of the Commonwealth of Virginia’s statute that pertains to divorce and insurance benefits, revoking the ex-wife’s access to such benefits after

divorce and offering them to the widow instead. She won the case in the Fairfax County Circuit Court, but Maretta then appealed to the Virginia Supreme Court, which overturned the initial verdict. Jacqueline Hillman then further appealed to the US Supreme court, which held up the verdict that Maretta is entitled to the benefits on the basis of previous Supreme Court verdicts where it was decided that federal insurance programs preempt state law. Simply put, this means that even if you bequeath all you have to your wife in your last will and testament, if your ex-wife’s name is listed as the beneficiary of your life insurance policy, the proceeds will go to your ex-wife.

This is just one of the many such cases that occur year after year. In all the upheaval that surrounds divorce proceedings, while obvious things such as changes in the will and bank accounts are made immediately, it is easy to forget an innocuous detail such as the named beneficiary in an insurance policy taken out years, even decades ago. Such negligence can potentially cause a whole host of problems though, and must be nipped in the bud as soon the divorce has been carried out.

The Importance of Naming a Beneficiary in Your Life Insurance Policy

Make sure to change your named beneficiary in all insurance policies so that your widow isn’t left high and dry if the unthinkable happens, after all, what is the point of an insurance policy if your recently widowed spouse doesn’t even end up receiving the benefit? AccuQuote also recommends that you name a contingent beneficiary. A contingent beneficiary is the person who will receive death benefits should the named beneficiary (or first beneficiary) die before you do.

Author Bio: Frank Mitchell has worked as a life insurance agent for 10 years. After an accident in 2011 that kept him at home for more than a year, Frank started offering advice on forums and other social media networks. He now works as financial advisor and in his spare time writes articles on subjects he is passionate about. On the weekends, you’ll find Frank dirt biking.

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