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!