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Court case shows federal law can affect insurance proceeds

On Behalf of | Jul 11, 2022 | Estate Litigation, Estate Planning, Guardianship |

State courts resolve disputes concerning divorces, namely the designation of a beneficiary on an insurance policy. In the legal world, exceptions almost always apply. A court case concerning beneficiary designation on a life insurance policy as part of a divorce decree presents a situation in which a federal exception applies to a situation already fraught with emotional issues based on questionable oral agreements and moral choices and the financial interests of children. 

Servicemembers’ Group Life Insurance

A couple with two children divorced in 2015. The decree included a condition that the husband maintains a life insurance policy with a death benefit designating the children as beneficiaries. After the wife’s remarriage several months later, the husband changed the named beneficiaries without her knowledge to his father and then brother, respectively.

The second husband, who had adopted the children, sued the brother with claims of interference, conspiracy, and other contract claims for using the insurance for himself and not for the children.

Letter of the law rules

Florida law would normally determine the outcome in a typical situation. The important difference in the case lies in the fact that the husband held a Servicemembers’ Group Life Insurance policy. A Supreme Court case has addressed this type of insurance.

Under federal law, the named beneficiary (the brother) provided in the policy receives the insurance proceeds. While sympathetic to the wife’s testimony regarding her first husband’s intentions, the trial court found no evidence the brother coerced the husband for the proceeds nor that any oral agreement bound the brother to provide for the children. Thus, the exception to the law on which the second husband relied did not apply.

Knowledge of what matters

Divorces demand dedication to a client’s interests with an understanding of the full picture.  Parties’ motives and expectations do not always match what the law, whether state or federal, requires. Attorneys who understand the law and how it applies can provide guidance.