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Will your kids, your spouse or your ex get your money? Its all up to you …..


Although not part of the ‘direct estate,’ beneficiary designations are an important part of a person’s overall estate. So when changes occur in a person’s life, especially something as momentous as a divorce, it is especially important that changes are made to the beneficiary designation forms. With the rising prevalence of divorce, this issue recently came before the US Supreme Court with a very important result.

In 2018, the Court heard a case involving a 2002 Minnesota law. The state law required automatic revocation of any beneficiary designations or life insurance policies or similar assets such as IRAs from a spouse beneficiary and instead required distribution to the contingent beneficiaries. This case pertained to Minnesotan Mark, who in 1997, bought a life insurance policy naming his wife as primary beneficiary and his two kids from a prior marriage as contingent (or secondary) beneficiaries. The couple divorced in 2007 and Mark died in 2011 without ever changing the beneficiary designation on the policy. The wife claimed the insurance proceeds stating that the policy was purchased prior to the Minnesota law and that Mark had nearly four years to change the beneficiary forms, but never did. The kids argued that the Minnesota ‘revocation-on-divorce’ law was clear and the divorce canceled the ex-wife’s beneficiary designation. (Note that New Mexico has a very similar ‘revocation-on-divorce’ law although a court order requiring a life insurance policy can trump this law). In its analysis, the US Supreme Court noted that “although there are exceptions, most divorcees do not aspire to enrich their former partners.” As such, a policy holder’s “failure to change a beneficiary after a divorce is more likely the result of neglect rather than choice.” Thus, the Court held in favor of the kids and upheld the Minnesota law. See, Sveen v. Melin, US Sup Ct., June 11, 2018, No. 16-1432.

What it means for you

We’ll say it again: beneficiary designations are an important part of your estate planning. Perhaps Mark consciously intended to leave a substantial asset like his life insurance policy to his ex-wife four years after their divorce. If so, he needed to address the issue intentionally, rather than cost the family in emotional and financial assets. If he intended to remove his ex-spouse as beneficiary, he should have filled out the proper forms for the life insurance policy or retirement asset and kept a copy in his Estate Planning Portfolio.

We get it. Life is complicated, and sometimes things don’t get done. But beneficiary designations are easier than you think. When you complete your estate plan with us at the Foster Legal Advisory Group, we will talk to you at least annually about beneficiary designations so that you can develop and maintain the best plan to protect those you love. If you aren’t already part of the wonderful team of clients at the Foster Legal Advisory Group, call us today for a free consult at 505-835-6580 or schedule an appointment today.

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