Update Beneficiary Designations After Divorce

Very seldom does the United States Supreme Court decide a case involving state probate law.  However, on June 3,  2013, the Court once again decided that federal law trumps state law when it comes to certain estate matters. This decision serves as a powerful reminder that an individual should definitely change his or her beneficiary designations following a divorce because state law may not do it automatically.

The Court issued its decision in Hillman v. Maretta, a case involving the Federal Employees’ Group Life Insurance Act of 1954. This law established a life insurance program for federal employees. It also provided that an employee can designate a beneficiary to receive the proceeds of his or her insurance policy upon their death. The Court decided that this federal law preempts a Virginia law that provides divorced couples are no longer the beneficiaries of each other’s life insurance.

This unanimous Supreme Court decision arose out of a conflict between a Virginia probate statute and the federal law. The Virginia probate statute automatically revokes a beneficiary designation in any contract that provides a death benefit to an ex-spouse. The Virginia statute appears to be a sensible solution to those situations where a husband and wife simply forget to change their beneficiary designations following their divorce. Unfortunately, in the Supreme Court case, federal law governed who was to receive the life insurance proceeds because the decedent was a federal employee covered by the federal statute. Of course any time a state law attempts to change the result that would occur under a federal law, there is a conflict — and that conflict is almost always resolved in favor of the federal law.

This Supreme Court decision only applies to federal plans and programs for federal government employees. However, it drives home the point that all estate plans and beneficiary designations should be reviewed and appropriately updated following a divorce.

Paul J. Dunn, Attorney at Law
Arizona Estate & Trust Law, Plc
379 Summit Pointe Drive
Prescott, AZ 86303
(928) 778-1988

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