The Supreme Court Decides Who Gets The Money: The Widow Or The Ex-Wife?


Posted on June 5th, 2013, by James Livesay in Family Law. No Comments

Life Insurance Benefits After DivorceOn June 3rd, 2013, the Supreme Court of the United States reviewed a provision of Virginia law and declared it invalid as applied, in the case of Hillman v. Maretta.

The case had to do with the distribution of life insurance proceeds for federal government employees enrolled in the Federal Employees’ Group Life Insurance (FEGLI) Program.

The facts were undisputed. A federal government employee by the name of Warren Hillman filed a Designation of Beneficiary with FEGLI listing his wife as the beneficiary. Mr. Hillman and his wife later divorced, and Mr. Hillman remarried, but his new wife was never designated as a FEGLI beneficiary. When Mr. Hillman died, Judy Maretta, the ex-wife, collected the FEGLI proceeds and was promptly sued in state court by Mr. Hillman’s widow Ms. Jacqueline Hillman.

At issue in the state court action and its appeals was the validity of a provision of Virginia law, located at Va. Code Section 20-111.1, having to do with the distribution of life insurance proceeds after divorce. The law provided that life insurance beneficiary designations in favor of spouses are automatically revoked upon divorce. In addition, the person or persons who would otherwise be entitled to receive such life insurance proceeds had a cause of action against the former spouse if the former spouse nonetheless was paid the life insurance proceeds due to the requirements of federal law.

Under Virginia law, Ms. Hillman had a clear-cut case. Although Judy Maretta was indisputably Mr. Hillman’s designated beneficiary at the time of his death, the divorce should have revoked the designation, thereby making Ms. Hillman the proper beneficiary. The problem for Ms. Hillman was that the provision of Virginia law revoking the designation appeared to directly conflict with federal law. Where federal and state laws conflict, the state law must give way under the Supremacy Clause to the U.S. Constitution. This is known as the doctrine of preemption. The provision of federal law at issue here provided that FEGLI life insurance proceeds are to be paid to the person or persons listed on any Designation of Beneficiary filed by the deceased employee, and to no one else.

In its opinion, the Justices of the Supreme Court unanimously agreed that Ms. Hillman’s claim was indeed preempted by federal law. The Court held that the federal law reflected Congress’s determination that FEGLI proceeds actually belong to the designated beneficiaries. That is, the designated beneficiaries have the right not only to receive FEGLI proceeds, but to retain them. The Virginia law, the Court further held, impermissibly interfered with these rights by requiring the designated beneficiaries to pay over the proceeds or else face personal liability. Therefore, the Virginia law was void, as applied to FEGLI proceeds, and Ms. Maretta was their proper beneficiary.

This result was not unanticipated. Although Ms. Hillman had prevailed in the state trial court, she had lost on appeal to the Supreme Court of Virginia, in an opinion issued in 2012, that reflected much of the same reasoning.

Shortly after the 2012 opinion was issued, Virginia’s General Assembly amended Va. Code Section 20-111.1 to ensure that parties to a divorce are aware of the current state of the law in regard to life insurance beneficiary designations. Since July 1 of that year, every Virginia divorce decree has had to include, in conspicuous, bold print, the following text:

Beneficiary designations for any death benefit, as defined in subsection B of § 20-111.1 of the Code of Virginia, made payable to a former spouse may or may not be automatically revoked by operation of law upon the entry of a final decree of annulment or divorce. If a party intends to revoke any beneficiary designation made payable to a former spouse following the annulment or divorce, the party is responsible for following any and all instructions to change such beneficiary designation given by the provider of the death benefit. Otherwise, existing beneficiary designations may remain in full force and effect after the entry of a final decree of annulment or divorce.

Anyone who has life insurance should take heed of these words. Your former spouse may well remain the beneficiary of your life insurance after your divorce. There are no guarantees. If you refuse to file an updated beneficiary designation, you do so at your own peril.

If you are undergoing or have undergone a divorce or separation in Virginia and have legal questions regarding your life insurance policies, please contact us to schedule a consultation with one of our experienced divorce attorneys today. We have experience litigating divorces and advising clients on life insurance issues in Manassas, Fredericksburg, Fairfax and throughout Northern Virginia.

Share Button

About 

Attorney James Livesay is a Partner at Livesay & Myers. After graduating from the University of Virginia School of Law in 1998, he began his legal career in the Navy JAG Corps, before entering private practice as a Virginia family lawyer in 2001. Along with partner Kevin Myers, Mr. Livesay founded Livesay & Myers in 2003. Today he advises the attorneys in each of the firm’s three offices.



Comments

Loading Facebook Comments ...
Our Locations
Fairfax Office
3975 University Dr #325
Fairfax, VA 22030
703-865-4746
Manassas Office
9408 Grant Ave #402
Manassas, VA 20110
571-208-1267
Fredericksburg Office
308 Wolfe St
Fredericksburg, VA 22401
540-370-4140