Revocation-on-Divorce – It Matters Where You Live
By Andy Ives, CFP®, AIF®
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Twenty-six states have adopted revocation-on-divorce statutes similar to each other, and these statutes are impacting court decisions.
Example #1: The U.S. Supreme Court, in an 8 – 1 ruling just this past June, concluded that life insurance proceeds would NOT go to an ex-spouse, even though she remained the beneficiary named on the beneficiary form after the divorce. Instead, the Court ruled that Minnesota state statute (where the case was originally contested) removing an ex-spouse as a beneficiary upon divorce is constitutional. The contingent beneficiaries received the proceeds.
Example #2: In October of this year, the Alabama Supreme Court heard a similar case involving an ex-spouse making a claim on a life insurance policy. Despite the fact the divorced couple had reconciled and planned to remarry (they had even repurchased the original wedding rings!), the Alabama Supreme Court (citing the U.S. Supreme Court ruling in Example #1) concluded the ex-spouse’s beneficiary designation was revoked by virtue of the divorce.
If the policy owner in either Example #1 or #2 above desired to have the ex-spouse remain as beneficiary on the life insurance policy after the divorce, they would have simply needed to update the beneficiary form. While these two examples pertain to life insurance, the court rulings could potentially apply in a similar manner to retirement assets.
It matters where you live, or sometimes where you die. Be aware of states with similar revocation-on-divorce statutes, and be sure to update your beneficiary forms after a divorce! The complete list of 26 states with these statutes (as of this writing) is as follows:
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