Dear Quentin,
My ex-husband has a $250,000 life-insurance policy. I’m 50 years of age and only have $45,000 saved. When we divorced, I made sure that I would be the named beneficiary so I could have security as I got older and pass this to my children, but he has informed my two kids that he can no longer afford to pay the $200-a-month premiums, and they would need to pay it. He has also long threatened to change the beneficiary designation. Can he do that?
This is his way of trying to undo the promise and commitment he made when we divorced. I understood that our divorce agreement specified that I should remain beneficiary of his life-insurance policy — that is how I remember it. I hoped, but I never fully trusted, that he would follow through on that. He was never faithful in our marriage, and he took pride in stiffing people he did business with and not paying his bills. Once a cheater, always a cheater.
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Ex-Wife & Mother
Dear Ex-Wife,
The answer, my friend, should be in your divorce decree.
“Assuming there is a life-insurance requirement in the divorce decree, it should spell out who will pay the premiums,” according to MassMutual. “It is important to have defined clear terms and responsibilities as it could be detrimental to the beneficiaries if the premiums do not get paid. If you have added your ex-spouse to the policy, you may request to receive copies of billing records and lapse notices.”
People usually add a provision to say the beneficiary cannot be changed without their consent. At the time of your divorce, you and your attorney should have clearly defined the policy owner, MassMutual adds. “This is important because the policy owner has the ability to change beneficiaries, rates and insurability, which can help protect your income. It is also possible to sign over the ownership of an existing policy prior to divorce proceedings.”
You don’t mention what kind of life-insurance policy your husband holds. A term-life policy lasts anywhere from 10 to 30 years, and if your ex-husband outlived that period, the policy would expire and the beneficiaries wouldn’t receive any money. A whole-life policy, on the other hand, has a cash value and, for that reason, costs more than a term-life policy. Once a whole-life policy has built up significant monetary value, the insured person can cash it out or borrow against it.
It’s not so unusual for a spouse to fail to comply with a divorce decree over a life-insurance policy. The spouse could cancel the policy, replace it or even change the beneficiaries. There are several issues here. First, it is your former husband’s responsibility to pay for the life-insurance policy and not make it his children’s responsibility. It’s unfortunate, unfair and petty that he is putting them in the middle of your dispute.
In Hillman vs. Maretta, the U.S. Supreme Court ruled in favor of a 66-year-old man’s ex-wife, rather than his widow, as the beneficiary of a life-insurance policy worth over $124,000. In this case, he may not have wanted his ex-wife, whom he had divorced 10 years before his death, to claim his life-insurance policy. But the divorce decree didn’t matter, because the document given to the insurance company had his ex-wife’s name on it.
State law varies
If your divorce decree was not clear regarding the beneficiary of your ex-husband’s life-insurance policy, the outcome may depend on the laws of your state. Can a divorce decree override a life-insurance policy? “Yes. If the policyholder was married in a community property state and got divorced, the ex-spouse may be entitled to some of the death benefit regardless of who is the named beneficiary,” according to Boonswang Law in Philadelphia.
Roughly half of U.S. states — including Florida, Pennsylvania, New Jersey, New York, Texas, Massachusetts and Colorado — have some form of revocation-upon-divorce statute that automatically removes an ex-spouse as a life-insurance beneficiary after divorce, the law firm adds. California law, meanwhile, excludes life-insurance policies from automatic revocation-upon-divorce laws.
A life-insurance beneficiary for a former spouse in California will pass muster, according to Carina Castañeda, a lawyer in Manhattan Beach, Calif., “unless the property settlement or divorce decree specifically provides for a contrary result; the policyholder changes the beneficiary designation; an insurance contract nulls the beneficiary designation upon divorce; [or] the former spouse legally waives their interest in the policy.”
We would all like to believe that former spouses will keep their word and perhaps act in a more honorable manner than they did during the marriage, whether it’s regarding child support, alimony, life-insurance policies or retirement accounts. But divorce doesn’t necessarily change people. In many cases, it can present an opportunity for a former spouse to again wield whatever power they have to create disruption in the life of their ex.
Your divorce attorney should be able to advise you as to what action you can take based on the laws in your state and the exact wording of your divorce decree. Beneficiary disputes, as that aforementioned case suggests, can be extremely complex and challenging to win. They can also, if they end up going to a higher court and dragging out for years, be hugely expensive. Your legal adviser will be able to tell you whether it’s worth it.
Stay strong, stay focused — and don’t let your ex get under your skin.
Previous columns by Quentin Fottrell: