The Supreme Court recently issued an opinion parsing out the practical concerns at play in a post-divorce life insurance case. Specifically, in Sveen v. Melin, a former spouse designated as primary beneficiary in her ex-husband’s life-insurance policy urged the Court to dissect the constitutionality of a Minnesota statute that automatically revoked such designation upon divorce. After review, the Supreme Court determined that revocation-upon-divorce statutes are indeed constitutional when applied retroactively.
To better understand the case at hand, consider the following facts: Mark Sveen married Kaye Melin in 1997 and designated her as the primary beneficiary of his life-insurance policy. In 2002, Minnesota revised its code so that the designation of a spouse as a beneficiary would automatically be revoked upon divorce. Mark and Kaye divorced in 2007, and much to the surprise of his children, he failed to update the beneficiary designation. So, when Mark died in 2011, the insurance company was uncertain how to proceed: should it pay the proceeds to Mark’s ex-wife (Kaye), or alternatively, to Mark’s children? Phrased differently, should the insurance company follow Mark’s original instruction, or alternatively, Minnesota’s new statute? Given this predicament, the insurance company asked the Court for help.
In an 8-1 opinion, the Court held that the retroactive application of Minnesota’s revocation-upon-divorce statute does not violate the contracts clause of the Constitution. According to the Court, the law in this case was meant to reflect the policyholder’s intent, thus supporting, rather than frustrating, the contractual scheme. Reasonably so, Mark, amongst many others, would probably not want his life insurance proceeds to pass to his ex-wife. Furthermore, the law in this case was unlikely to defeat the policyholder’s expectations, as the policyholder could not sensibly assume a beneficiary designation would remain in place post-divorce. Moreover, the law in this case purely functioned as a default rule, which the policyholder could undo at any point in time by submitting a new beneficiary designation form. According to the Court, the hassle, or lack thereof, of such negligible paperwork does not violate the contracts clause under its established precedent.
Like Minnesota, Texas has a similar statute under the Texas Family Code §9.301, which is why the Supreme Court’s decision is particularly relevant to us. In Texas, a divorce invalidates any pre-divorce designation of the former spouse as a beneficiary of life insurance unless (1) the decree designates the insured’s former spouse as the beneficiary, (2) the insured re-designates the former spouse as the beneficiary after rendition of the decree, or (3) the former spouse is designated to receive the proceeds in trust for, on behalf of, or for the benefit of a child or a dependent of either former spouse. It is important to keep in mind, however, that this state statute is preempted by ERISA!
This post comes from Saira Ukani, summer law clerk for O’Neil Wysocki. Saira is a law student at the University of Texas School of Law. She is interested in family law as a career after law school. We are happy to have her helping with our blog as well!
Divorces among clients over the age of 50 are becoming more prevalent as baby boomers age. They balk at the terms “gray divorce” or “senior citizens”. The best term to use may be “seasoned”, according to an article by Paula G. Kirby in the latest issue of the Family Advocate by ABA Section of Family Law.
Seasoned divorces require certain considerations.
Some seasoned clients may need special accommodations for mobility, hearing, and vision loss or emotional or mental challenges.
Capacity or diminished capacity concerns.
Confidentiality and third party participation by family and friends.
The need for support and assistance for the client.
Obtaining financial, medical, and other information from professionals with joint representation of both spouses.
Handling the stress of protracted settlement negotiations or a long day at mediation.
If the client has issues with hearing or sight, make an ADA accommodations request of the Court for a device to increase sound or a projector to help with sight.
Releasing attachment to the attorney when the case is concluded.
Being emotionally prepared for divorce is a crucial part of working through the process. It is particularly difficult if one spouse is emotionally prepared and the other spouse is not ready yet. If you are not emotionally ready for divorce, then the emotion will be intertwined with the decision-making that must happen to effectively work through the divorce most effectively. Here are some questions to ask yourself to know if you are ready for divorce:
Is there anything else you could do to save your marriage? Rarely is a divorce caused only by the actions of one spouse. Have you said the words “I’m sorry” for the part you played in the breakdown of the marriage? Sometimes those simple words can be a pathway to finding each other again. Would counseling help?
Are you at peace with the decision to divorce and the changes the decision will cause? Can you walk out of the door without anger, frustration, or hurt? Are you ready to make rational life-changing decision, leaving the emotion aside? Is it possible that you are still in love with your spouse?
Have you educated yourself on the divorce process? Do you have a realistic assessment of the process and what to expect from the divorce?
Do you know the economic realities that divorce will bring to your situation? Can you afford to divorce? Are you willing to accept a lower standard of living, if that is necessary to get a divorce? Are you ready to be financially on your own?
Are you ready to partner with your spouse to co-parent your children? Your marriage may be ending, but your relationship as co-parents will continue forever. Can you set aside the marriage issues and work with your spouse to raise your children? Can you keep your kids out of the adult issues?
If you are not ready for divorce, work with your spouse to try to explore any remaining avenues. Unfortunately, filing for divorce only takes one person. So, one spouse may be ready and file for divorce, even if the other spouse is not ready. For the spouse who has to face divorce before he or she is ready, it is hard to get to an emotional place deal with a divorce forced upon you. It is important to work through things as quickly as you can so you can face the divorce rationally.
As people make new year’s resolutions to start their new year with a clean slate, some of the best Dallas, Texas family lawyers, as well as family law attorneys across the United States, report a rise of nearly one-third of new divorce filings in January. The American Academy of Matrimonial Lawyers confirms a spike of 25-30% according to a survey of their members. New year’s resolutions are spurred on by a stressful holiday season and maybe even the stress of too much family time. Similar trends are seen in the U.K., where one survey reports that one in five couples plan to divorce after the holidays.
If you are planning to divorce in the new year, one of the most important self-help steps you can take is to become familiar with the financial situation of your marriage. Get an up-to-date assessment of all of the financial accounts owned together or separately. Keeping copies of records given to the CPA when preparing taxes can also provide fertile areas for inspection to make sure that all financial information is addressed in the divorce.
Because divorce is one of the biggest financial decision people make, it is important not to make the decision when you are tired or emotional. Be smart and evaluate your end game – make sure you know the full situation and the consequences from a financial perspective of the decisions you are about to make.
Sometimes, even though the emotional situation of a marriage may be troublesome, divorce may not be the best answer. Frequently one spouse carries the health insurance, which will no longer be available to the other spouse after divorce. For a spouse who needs the health insurance and is not able to affordably get an individual policy, this can be a crucial decision factor.