Originally published by Michelle O'Neil.
The Supreme Court recently issued an opinion parsing out the practical concerns at play in a post-divorce life insurance case. Specifically, in Sveen v. Melin, a woman named as primary beneficiary in her ex-husband’s life-insurance policy challenged a Minnesota statute that automatically revoked that designation upon divorce. All in all, the Supreme Court was asked whether such revocation-upon-divorce statutes are constitutional when applied retroactively—that is, when applied to beneficiary designations made before the statute was enacted. In short, the answer is ‘yes!’
To better understand the case at hand, consider the following facts: Mark Sveen married Kaye Melin in 1997 and named her as the primary beneficiary of his life-insurance policy. In 2002, Minnesota amended its probate code to provide that the designation of a spouse as a beneficiary would be automatically revoked upon divorce. Sveen and Melin divorced in 2007, and much to the surprise of his children, he never updated the beneficiary designation. So, when Sveen died in 2011, the insurance company was uncertain how to proceed: should it pay the proceeds to Sveen’s ex-wife (Kaye), or alternatively, to Sveen’s children? Phrased differently, should the insurance company follow Sveen’s original instruction, or alternatively, Minnesota’s new statute? Given this predicament, the insurance company asked the Court for help.
In an 8-1 opinion, the Court held that the retroactive application of Minnesota’s revocation-upon-divorce statute does not violate the contracts clause of the Constitution. According to the Court, the law in this case was meant to reflect the policyholder’s intent, thus supporting, rather than frustrating, the contractual scheme. Indeed, Sveen, amongst many others, would probably not want his life insurance proceeds to pass to his ex-wife. Furthermore, the law in this case was unlikely to defeat the policyholder’s expectations, as the policyholder could not reasonably expect a beneficiary designation to stay in place post-divorce. Moreover, the law in this case merely served as a default rule, which the policyholder could undo at any point in time by submitting a new beneficiary designation form. According to the Court, the burden of such negligible paperwork does not violate the contracts clause under its well-established precedent.
Like Minnesota, Texas has a similar statute under the Texas Family Code §9.301, which is why the Supreme Court’s decision is particularly relevant to us. In Texas, a divorce invalidates any pre-divorce designation of the former spouse as a beneficiary of life insurance unless (1) the decree designates the insured’s former spouse as the beneficiary, (2) the insured re-designates the former spouse as the beneficiary after rendition of the decree, or (3) the former spouse is designated to receive the proceeds in trust for, on behalf of, or for the benefit of a child or a dependent of either former spouse. It is important to keep in mind, however, that this state statute is preempted by ERISA!
This post comes from Saira Ukani, summer law clerk for O’Neil Wysocki. Saira is a law student at the University of Texas School of Law. She is interested in family law as a career after law school. We are happy to have her helping with our blog as well!
Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.
from Texas Bar Today https://ift.tt/2JPboxH
via Abogado Aly Website
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