Man Fails to Update His Beneficiary Designation: Ex-Wife Receives Insurance ProceedsOur New Mexico Estate Planning Lawyers have previously addressed the importance of periodically reviewing estate plans and estate planning documents because major life events may change one’s preferences or priorities. When one experiences a significant event like the birth of a child, divorce, remarriage, adoption, death of a spouse, or other similar types of life changes, the decision to put off changing estate planning documents can have a devastating impact. These risks are not hypothetical examples thought up by creative estate planning attorneys, but real problems that can be financially devastating for loved ones. A recent U.S. Supreme Court ruling in a case from another state provides a good illustration of the potential consequences of not keeping one’s estate plan current.

The U.S. Supreme Court in the case of Hillman v. Maretta, 2013 WL 2371463 (June 3, 2013) ruled that a surviving wife was not entitled to her husband’s life insurance proceeds valued at over $125,000 because he had failed to change the beneficiary designation following his prior divorce. While it is a fair assumption that the husband did not intend to deny his current wife the benefit of this asset in favor of a former spouse that he divorced years before, the widow will be deprived access to a valuable source of income that may have been critical to her ability to maintain an acceptable standard of living following the passing of her husband.

The irony is that the decedent may have elected not to make the change because he thought it was unnecessary under the state law applicable in the case. A statute in the state where the case originated specifically provided relief from the unintended consequences of failing to change the beneficiary on an insurance policy following a divorce. Under the state law, the insurance proceeds would have been paid to the person who would have normally been entitled to such benefits under applicable law absent the beneficiary designation. In other words, the husband could have conducted some quick research on state law on the Internet and assumed that there was no need to deal with the hassle of changing the beneficiary on the policy.

Unfortunately, the decedent worked as a federal employee so the Federal Employees Group Life Insurance Act of 1954 governed the distribution of the proceeds under the insurance policy. Under this law, insurance premiums are to be distributed first to the beneficiary and then to the widow or widower of the decedent. Because federal law preempts state law in this situation, the insurance proceeds were given to the woman that the decedent had divorced many years before his death instead of the woman he was married to at the time of his death.

This provides a particularly stark example of the unpredictable and regrettable consequences that stem from not periodically consulting with an estate planning attorney to review and revise an estate plan. In a scenario like this one, the decedent may have left most of his other assets to adult children or other loved ones because he presumed the life insurance proceeds would provide adequately for his wife. If this were true, his widow would now be in desperate financial straits.

Effective Implementation and New Mexico Estate Planning

The above information is designed solely to illustrate general principles of law, and does not constitute a specific legal opinion on individual cases. We suggest that you contact experienced legal counsel for a specific opinion tailored to your individual circumstances.

If you have not had your estate plan reviewed in some time, our New Mexico Estate Planning Lawyers may be able to help. The New Mexico Estate Planning Attorneys at Jay Goodman & Associates, PC offer a free consultation in our centrally located offices in Santa Fe and Albuquerque so that we can discuss your specific situation. Call us today to schedule your free consultation at (505) 989-8117 to learn about your rights and options.


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