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!

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Photo of Michelle O'Neil Michelle O'Neil

Michelle May O’Neil has 27 years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes…

Michelle May O’Neil has 27 years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes genuine compassion for her client’s difficulties, yet she can be relentless when in pursuit of a client’s goals. One judge said of Ms. O’Neil, “She cannot be out-gunned, out-briefed, or out-lawyered!”

Family Law Specialist

Ms. O’Neil became a board-certified family law specialist by the Texas Board of Legal Specialization in 1997 and has maintained her certification since that time. While representing clients in litigation before the trial court is an important part of her practice, Ms. O’Neil also handles appellate matters in the trial court, courts of appeals and Texas Supreme Court. Lawyers frequently consult with Ms. O’Neil on their litigation cases about specialized legal issues requiring particularized attention both at the trial court and appellate levels. This gives her a unique perspective and depth of perception that benefits both her litigation and appellate clients.

Top Lawyers in Texas and America

Ms. O’Neil has been named to the list of Texas SuperLawyers for many years, 2011-2018, a peer-voted honor given to only about 5% of the lawyers in the state of Texas. In 2014-2018, Ms. O’Neil received the special honor of being named by Texas SuperLawyers as one of the Top 50 Women Lawyers in Texas, Top 100 Lawyers in Texas, and Top 100 Lawyers in DFW. She was named one of the Best Lawyers in America for 2016 and received an “A-V” peer review rating by Martindale-Hubbell Legal Directories for the highest quality legal ability and ethical standards.

Author and Speaker

A noted author, Ms. O’Neil released her second book Basics of Texas Divorce Law in November 2010, with a second edition released in 2013, and a third edition expected in 2015.  Her first book, All About Texas Law and Kids, was published in September 2009 by Texas Lawyer Press. In 2012, Ms. O’Neil co-authored the booklets What You Need To Know About Common Law Marriage In Texas and Social Study Evaluations.  The State Bar of Texas and other providers of continuing education for attorneys frequently enlist Ms. O’Neil to provide instruction to attorneys on topics of her expertise in the family law arena.