Former spouse receiving life insurance benefits

One common issue that I often encounter is a disagreement about whether a former spouse is entitled to receive life insurance benefits. A typical scenario is that a married couple buys life insurance and designates each other as the beneficiary. But when they get divorced, they forget to update the beneficiary designation.

The first question I ask is whether the policy is governed by state or federal law? To determine this, I examine where the policy was purchased. If it was purchased individually through an agent or an online resource, the policy is usually governed by state law. However, if it was obtained through a private employer, by a service member or veteran, or if it's a federal employee's policy, it's typically covered by federal law.

Policies governed by federal law usually require the insurance company to pay the designated beneficiary, even if they are divorced. However, state law can be very different. About 30 states have laws that generally invalidate designations in favor of former spouses, with very few exceptions. This means that the former spouse usually won't receive the money, and it will instead go to a contingent beneficiary or the estate of the deceased person.

But what if the policy is governed by federal law? Is there anything that can be done to prevent the former spouse from receiving the proceeds? This is where the issue gets complicated. Some states have recognized causes of action by the estate of the decedent against the former spouse, typically involving enforcement of the divorce decree. For instance, many states, including Texas, have standard form divorce decrees with common language that each divorcing spouse waives any right or claim or interest to the proceeds of the other spouse's life insurance policy.

Some state courts have also recognized a claim against the former spouse for the benefit of the decedent's estate. However, this is a very complex area of the law, and it's important that you contact someone who has experience in evaluating these claims. I have successfully represented estates against former spouses who are trying to keep the proceeds, and I have also represented former spouses who are resisting a challenge to turn over the policy proceeds.

If you're facing a situation like this, feel free to give me a call.