Marital Settlement Agreements, Life Insurance and ‘Irrevocable’ Beneficiaries in Florida

A few years ago, the U.S. Supreme Court ruled on a case involving an ex-wife, a surviving widow and a deceased man’s life insurance proceeds. The man had named the ex-wife as his beneficiary while they were still married, and then never changed that designation. The widow argued that she should get the money because she was the surviving spouse. The ex-wife argued that the money was hers because the law required honoring the designation attached to the policy. The court ruled for the ex-wife, because the law allows for disregarding beneficiary designations only in rare circumstances, and this was not one of those.

What does all this mean if you are named as the beneficiary of your ex-spouse’s life insurance policy as part of your divorce settlement? If your ex-spouse subsequently creates a new beneficiary designation without your knowledge that names someone new after your divorce is finalized, will the law honor that changed designation and will you lose that insurance money when your ex-spouse dies? As a recent case originating in the Orlando area demonstrates, the answer is no. As always, to find out exactly how the law applies to your specific circumstances, be sure to consult a knowledgeable South Florida family law attorney.

D.P., a physician, was married to R.P. for 25 years, divorcing in 2006. The divorce agreement required the husband to pay the wife $6,000 per month in alimony. As is not uncommon in alimony award situations, especially larger ones, the court ordered the husband to obtain a life insurance policy to secure the alimony award and to name R.P. as the policy’s death beneficiary. Without R.P.’s knowledge, the husband changed the beneficiary designation in 2011 to name Melinda (the woman who would become his third wife in 2013) as the beneficiary. R.P. knew nothing about this change until after D.P. died.

R.P. went to court to pursue the insurance proceeds and the courts ruled in her favor. As the appeals court stated, agreements related to life insurance policies like the one D.P. and R.P. completed are a common type of agreement in divorce cases, and they are entirely legal. R.P. won her case because the divorce agreement between her and D.P. required the husband to name R.P. as the “irrevocable beneficiary.” That means that, legally, this was a special situation in which the policy owner couldn’t change the beneficiary designation. (Generally, a policy owner can change the beneficiary as long as he’s alive and mentally competent to do so.) That “irrevocable beneficiary” language, as the court explained, meant that D.P. “effectively divested himself of his ownership interest” in the policy when he made the agreement. Anytime someone who has divested himself of ownership of an insurance policy tries to change the person named as the beneficiary, that change is considered to be a legal “nullity,” which means that the law looks at the case as if the beneficiary change had never happened.

Thus, there are a couple of key things you can take from this Central Florida case. One, it is always essential to be certain that you “sweat the small stuff” in your divorce agreement, just like any contract negotiation. A key to R.P.’s success was that the divorce agreement required the husband to name her as the irrevocable beneficiary. Two, as long as your divorce agreement is properly worded, you need not fear being “undercut” and having the insurance proceeds for which you negotiated in your marital settlement agreement lost due to a subsequent and secret change of the beneficiary designation.

For all the family law issues in your life, rely upon the South Florida family law attorneys at Sandy T. Fox, P.A. Our attorneys have been providing clients with the effective representation they need for many years. Contact our attorneys online or by calling (800) 596-0579 to schedule your confidential consultation.

More blog posts:

How One Florida Husband Succeeded in Getting an Order Requiring Him to Purchase Life Insurance Reversed in His Alimony Case, Fort Lauderdale Divorce Lawyer Blog, July 27, 2018

The Rules for Requiring a Spouse to Purchase Life Insurance to Secure an Alimony Award in Florida, Fort Lauderdale Divorce Lawyer Blog, Nov. 15, 2017

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