Court decides issue of policy beneficiary choice after divorce

The U.S. Supreme Court on June 11 issued a decision involving the question of who inherits the proceeds of an insurance policy when the owner of the policy apparently forgot to remove his former wife as beneficiary after they divorced. The problem that is illustrated is instructive to all couples who are in divorce or planning to file for divorce in the future. The lesson that the case teaches is that such matters should be resolved and taken care of during the divorce and immediately thereafter, both in Georgia and all other states.

In a vote of 8 to 1, the Court decided in favor of the decedent's children over his second wife, who had been married to him for 10 years and who was still listed as the beneficiary on his life insurance policy at the time of his death despite their divorce four years earlier. The Court had to decide whether a state law passed in 2002 was constitutional. The statute provided that when a person's spouse is listed as the beneficiary on a life insurance policy, that designation is automatically void if there is a divorce.  

The Minnesota statute came into conflict with a provision of the U.S. Constitution that says that no state shall enact any law that impairs the obligation of contracts. Applying a practical approach, the Court reasoned that the legislature was trying to reflect what the policyholder would have wanted in those circumstances. The Court pointed out that most people simply forget to change the beneficiary designation after they are divorced.

The Court reasoned that most people don't even think that the beneficiary designations will remain unchanged after a divorce. Therefore, the statute was not technically a violation of the contracts clause in the U.S. Constitution because it did not impair the contractual obligation. Instead, it reflected the true nature of the obligation in light of the changed legal relationship created by divorce. The case will prevent numerous future problems in Georgia and elsewhere that often arise when forgetfulness creates a common post-divorce conflict.

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