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Beneficiary designations, part 2: a Supreme Court case

In last week's post, we wrote about the importance of updating beneficiary designations in life insurance policies and on retirement accounts. The reason for doing so is simple: to make sure the designations continue to express the priorities of the policy or account holder.

A good example of this can be seen in a current U.S. Supreme Court case. The Court heard oral arguments last month in Hillman v. Maretta, a case involving a man who neglected to change the beneficiary of his life insurance after getting divorced and remarrying. The case serves as a reminder to people in Massachusetts and across the country of the importance of making beneficiary changes in a timely manner.

In Hillman v. Maretta, a man designated his then-wife as the beneficiary of this life insurance policy. Two years later, the couple got divorced, but the man forgot to change the beneficiary on the policy. He also did not make the change a few years later, when he married another woman.

Six years after getting remarried, the man died. His ex-wife, not his widow, received the proceeds of his life insurance policy.

The widow sued under state law, pointing to a Virginia statute declaring that a beneficiary designation of a divorced spouse is revoked when there is a widow or widower who survives the policy holder.

The counter-argument, however, is that federal law may preempt (take precedence over) state law. Federal law is involved because the insurance policy in question was regulated under a federal law. This law is the Federal Employees' Group Life Insurance Act (FEGLIA).

Please visit our page on estate administration.

Source: "Will the widow or the ex-wife get the money? Supreme Court to decide," The Washington Post, Diana Reese, 4-22-13

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