Can a life insurance policy beneficiary designation be automatically changed by law upon divorce without anyone’s consent? There are two recent court cases on this subject. The first involved a husband purchasing a policy, naming his new wife primary beneficiary and children from a prior marriage as contingent beneficiaries. They later divorced, but neither the insured nor the divorce judgment addressed the policy. The insured died and, needless to say, there was litigation over who gets the insurance benefits. The case reached the Supreme Court, which decided against the ex-wife, using the theory of presumed and probable intent. The Court held that the Minnesota revocation-on-divorce statute did not violate the laws of contracts.
The second case has a similar fact pattern, except that the policy was owned by the former spouse when the insured died. The Court decided (correctly, in my view) the state’s revocation-on-divorce statute was not applicable to policies not owned by the decedent at death. The message is that the professionals advising the parties in a divorce need to react to a dramatic change in circumstances to avoid messes and understand intent. Otherwise, state laws will presume intent.
