Changing Your Life Insurance Policy After Divorce

John and Jane get divorced. John fails to change the primary beneficiary of his life insurance policy from Jane to someone else. John dies. Is Jane entitled to the proceeds from his life insurance policy?

Changing Your Life Insurance Policy After DivorcePrior to July 2012, Jane could have made a successful claim for John’s life insurance benefits. Now, it’s a little more complicated.

Florida Statutes Section 732.703 governs the effect of divorce on certain assets that could be transferred to a former spouse at death.

To sum it up: If Jane is the primary beneficiary of John’s life insurance policy, signed before they divorced, and after the divorce John fails to change the primary beneficiary, her designation is void and the benefits will go to the policy’s secondary beneficiary.

Note: There are some exceptions to this rule. (See below.)

The statute provides, in part:

(2) A designation made by or on behalf of the decedent providing for the payment or transfer at death of an interest in an asset to or for the benefit of the decedent’s former spouse is void as of the time the decedent’s marriage was judicially dissolved or declared invalid by court order prior to the decedent’s death, if the designation was made prior to the dissolution or court order. The decedent’s interest in the asset shall pass as if the decedent’s former spouse predeceased the decedent.

It applies to the following assets:

(a) A life insurance policy, qualified annuity, or other similar tax-deferred contract held within an employee benefit plan.
(b) An employee benefit plan.
(c) An individual retirement account described in s. 408 or s. 408A of the Internal Revenue Code of 1986, including an individual retirement annuity described in s. 408(b) of the Internal Revenue Code of 1986.
(d) A payable-on-death account.
(e) A security or other account registered in a transfer-on-death form.
(f) A life insurance policy, annuity, or other similar contract that is not held within an employee benefit plan or a tax-qualified retirement account.

After your divorce, removing your ex as primary beneficiary of your life insurance policy is advised, if that is what you wish to do. Should you desire to leave him or her as primary beneficiary – say, for the benefit of the children – then you need something expressly stating that he or she is meant to remain the primary beneficiary.

Exceptions to the Rule

According to the law, the statute does not apply:

(a) To the extent that controlling federal law provides otherwise;
(b) If the governing instrument is signed by the decedent, or on behalf of the decedent, after the [divorce order] and such governing instrument expressly provides that benefits will be payable to the decedent’s former spouse;
(c) To the extent a will or trust governs the disposition of the assets and s. 732.507(2) or s. 736.1105 applies;
(d) If the [divorce order] requires that the decedent acquire or maintain the asset for the benefit of a former spouse or children of the marriage, payable upon the death of the decedent either outright or in trust, only if other assets of the decedent fulfilling such a requirement for the benefit of the former spouse or children of the marriage do not exist upon the death of the decedent;
(e) If, under the terms of the [divorce order], the decedent could not have unilaterally terminated or modified the ownership of the asset, or its disposition upon the death of the decedent;
(f) If the designation of the decedent’s former spouse as a beneficiary is irrevocable under applicable law;
(g) If the governing instrument is governed by the laws of a state other than this state;
(h) To an asset held in two or more names as to which the death of one co-owner vests ownership of the asset in the surviving co-owner or co-owners;
(i) If the decedent remarries the person whose interest would otherwise have been revoked under this section and the decedent and that person are married to one another at the time of the decedent’s death; or
(j) To state-administered retirement plans under chapter 121.

Changing Your Life Insurance Policy After Divorce – A Checklist

JDSupra.com provided the following checklist:

  • Did the insured die after July 1, 2012?
  • Is the asset (e.g., benefit plan) within the scope of section 732.703?
  • Is there a marital settlement agreement that addresses the asset?
  • Does the marital settlement agreement require a former spouse to maintain the asset as security for alimony or child support?
  • Is there a final judgment of dissolution that refers to the asset?
  • Is there evidence of a testamentary instrument (e.g., last will and testament) naming a former spouse as beneficiary of the asset upon the owner’s death?
  • Does the instrument governing disposition of the asset upon death specify the relationship of the beneficiary to the decedent, or provide the beneficiary is not the decedent’s spouse?

Questions to determine if one of the exceptions applies:

  • Is the asset controlled by federal law, e.g., 401(k) plans and Keogh plans under the Retirement Equity Act (REA) of 1984; a plan under the Federal Employees’ Group Life Insurance Act of 1954 (FEGLIA); or a plan under the Servicemembers’ Group Life Insurance Act (SGLIA)?
  • Is the asset a state-administered retirement plan, under the Florida Retirement System, which applies, for example, to pension plans for state and county officers and employees, law enforcement officers, firefighters, highway patrol workers, correctional officers, and public school teachers
  • Does the policy or application for insurance address dissolution or annulment?
  • Does a will or trust instrument govern the disposition of the asset and, if so, does either section 732.507, Florida Statutes (e.g., a specific post-divorce designation of former spouse in will or obligation in a final judgment to make the former spouse an irrevocable beneficiary) or section 736.1105, Florida Statutes (specific post-divorce designation of former spouse in trust instrument or obligation in a final judgment of dissolution make the former spouse an irrevocable beneficiary?
  • Following entry of the final judgment of dissolution or annulment, did the decedent sign a new designation expressly naming the former spouse as beneficiary?
  • Does a final judgment or settlement agreement obligate the insured to keep the former spouse or minor children as irrevocable beneficiaries?
  • Does the final judgment require the insured to maintain the policy for a former spouse’s benefit or for the benefit of any minor children?
  • Under the terms of the final judgment, could the decedent unilaterally have terminated or modified ownership of the asset without anyone else’s prior knowledge and consent?
  • Are other assets of the decedent available to fulfill such requirement for the benefit of the former spouse or minor children?
  • Is the beneficiary designation irrevocable under applicable law?
  • Is the contract or agreement governed by state law other than Florida?
  • Does operation of law vest ownership of an asset in one or more surviving co-owners?
  • Did the decedent remarry the former spouse and were they married to one another at the time of death?

For legal advice about changing your life insurance policy after divorce, contact George Gelb today!

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