By Michael P. Sampson
Florida law provides that, upon dissolution or annulment of marriage, designations of one former spouse as beneficiary on death of the other spouse, multiple covered assets pass as if the insured decedent’s former spouse predeceased the insured decedent. This has implications for insurers, broker-dealers, and employee benefit plans when reviewing death claims.
How it Plays Out
A former wife named as primary beneficiary on her former husband’s life insurance policy asserts a claim for benefits under the policy. Following their divorce, the insured former husband never changed his beneficiary designation.
The payor of life insurance proceeds, relying on section 732.703, Florida Statutes, may review the deceased insured’s marital status on the death certificate and his relationship to the claimant, make payment decisions under different scenarios, and avoid the delay and expense of an interpleader action.
Section 732.703(5) authorizes a payor to pay the secondary beneficiary if the death certificate states that the decedent was not married at the time of his death. The payor/insurer may rely on the decedent’s marital status as shown on the death certificate, “Single” or “Divorced” or “Married (to someone other than the former spouse), and pay the secondary beneficiary, unless a statutory exception applies.
Likewise, if the death certificate states the decedent was married to the spouse who is named as the primary beneficiary of the asset upon death, the payor/insurer will not be liable for paying on account of, or transferring an interest in, that portion of the asset to such primary beneficiary. As a precaution, the payor/insurer should make further inquiry if it is put on actual notice—for example, through a written notification from the insured or a publicly recorded final judgment of dissolution—that the named primary beneficiary and decedent were not married to each other at the time of death.
If the governing instrument names a beneficiary, but does not specify the relationship between the decedent and named beneficiary, or if it explicitly provides the beneficiary is not the decedent’s spouse, the payor/insurer will not be liable for paying on account of, or transferring an interest in, the asset to the named beneficiary.
If the death certificate is silent about the decedent’s marital status at the time of death, the payor is not liable for paying on account of, or for transferring an interest in, that portion of the asset to the primary beneficiary upon delivery to the payor of an affidavit validly executed by the primary beneficiary in substantially the form set forth in the statute, section 732.703(5)(b).
The Law Before Section 732.703
Florida law voided a provision of a will that affected a decedent’s spouse upon the dissolution or annulment of the marriage. If the person died without changing the will following divorce or annulment, the will was executed as though the former spouse predeceased the decedent.
But the same was not true for non-probate or non-trust assets, such as a life insurance policy, if the decedent failed to remove the former spouse as the designated beneficiary after dissolution of marriage. Before section 732.703 was enacted, courts examined whether marital settlement agreements specifically provided who would or would not receive death benefits or would be the beneficiary of life insurance, and found general language in agreements insufficient to override plain language of beneficiary designations. See Crawford v. Barker, 64 So.3d 1246, 1248 (Fla. 2011); Cooper v. Muccitelli, 682 So.2d 77 (Fla. 1996); Luscz v. Lavoie, 787 So.2d 245, 250(Fla. 2d DCA 2001); Smith v. Smith, 919 So.2d 525 (Fla. 5th DCA 2005).
Applicability of Statute
The amended section 732.703(2), Florida Statutes provides: “A designation made by or on behalf of the decedent providing for the payment or transfer at death of an interest in an asset to or for the benefit of the decedent’s former spouse is void as of the time the decedent’s marriage was judicially dissolved or declared invalid by court order prior to the decedent’s death, if the designation was made prior to the dissolution or court order. The decedent’s interest in the asset shall pass as if the decedent’s former spouse predeceased the decedent.”
The amended statute applies to decedents who die after July 1, 2012, regardless of when they made a beneficiary designation.
The statute applies to the following assets in which a Florida resident has an interest at death:
- A life insurance policy, qualified annuity, or other similar tax-deferred contract held within an employee benefit plan.
- An employee benefit plan.
- An individual retirement account, including an individual retirement annuity described in section 408(b) of the Internal Revenue Code of 1986.
- A payable-on-death account.
- A security or other account registered in a transfer-on-death form.
- A life insurance policy, annuity, or other similar contract that is not held within an employee benefit plan or a tax-qualified retirement account.
There are important exceptions to the statute. The designated beneficiary will not be deemed to have predeceased the beneficiary if:
- Controlling federal law provides otherwise. See, for example, Hillman v. Maretta, 133 S. Ct. 1943 (2013), in which the U.S. Supreme Court held federal law, the Federal Employees’ Group Life Insurance Act of 1954, preempted a Virginia statute similar to Florida’s automatically revoking a beneficiary designation on a federal employees’ life insurance policy. The decedent, a federal employee, remarried but never changed the designation of his former wife as beneficiary. His widow lost her lawsuit seeking to direct the payment of the death benefit to his estate, of which she was beneficiary, rather than to his former wife. Citing Hillman, a Florida state court held, if the Servicemembers’ Group Life Insurance Act (SGLIA) protected a qualified beneficiary designation under a life insurance policy qualified under the SGLIA, federal law would preempt the state court’s order directing a former husband to change the beneficiary designation of his existing life insurance policy. Hirsch v. Hirsch, 136 So. 3d 622, 623-34 (Fla. 2d DCA 2013).
- The governing instrument is signed by or on behalf of the decedent after the dissolution judgment or order of annulment and expressly provides that the interest will be payable to the designated former spouse, regardless of dissolution or invalidity of the decedent’s marriage.
- To the extent a will or trust governs the disposition of assets and section 732.507, Florida Statutes (e.g., a specific post-divorce designation of former spouse in will or obligation in a final judgment to make the former spouse an irrevocable beneficiary) or section 736.1105, Florida Statutes applies.
- A final judgment of dissolution or annulment requires the decedent to maintain the asset for the benefit of the former spouse or children of the marriage, payable on death outright or in trust, only if other assets of the decedent fulfilling such requirement for the benefit of the former spouse or children do not exist upon death.
- The decedent did not have the ability unilaterally to change the beneficiary or pay-on-death designation.
- The designation of the decedent’s former spouse as a beneficiary is irrevocable under applicable law.
- To an asset held in two or more names as to which the death of one co-owner vests ownership of the asset in the surviving co-owner or co-owners.
- The decedent remarries the person whose interest would otherwise have been revoked under this section and the decedent and that person are married to one another at the time of the decedent’s death.
- To state-administered retirement plans under Chapter 121, Florida Statutes.
- Did the insured die after July 1, 2012?
- Is the asset (e.g., benefit plan) within the scope of section 732.703?
- Is there a marital settlement agreement that addresses the asset?
- Does the marital settlement agreement require a former spouse to maintain the asset as security for alimony or child support?
- Is there a final judgment of dissolution that refers to the asset?
- Is there evidence of a testamentary instrument (e.g., last will and testament) naming a former spouse as beneficiary of the asset upon the owner’s death?
- Does the instrument governing disposition of the asset upon death specify the relationship of the beneficiary to the decedent, or provide the beneficiary is not the decedent’s spouse?
- Questions to determine if one of the exceptions applies
- Is the asset controlled by federal law, e.g., 401(k) plans and Keogh plans under the Retirement Equity Act (REA) of 1984; a plan under the Federal Employees’ Group Life Insurance Act of 1954 (FEGLIA); or a plan under the Servicemembers’ Group Life Insurance Act (SGLIA)?
- Is the asset a state-administered retirement plan, under the Florida Retirement System, which applies, for example, to pension plans for state and county officers and employees, law enforcement officers, firefighters, highway patrol workers, correctional officers, and public school teachers
- Does the policy or application for insurance address dissolution or annulment?
- Does a will or trust instrument govern the disposition of the asset and, if so, does either section 732.507, Florida Statutes (e.g., a specific post-divorce designation of former spouse in will or obligation in a final judgment to make the former spouse an irrevocable beneficiary) or section 736.1105, Florida Statutes (specific post-divorce designation of former spouse in trust instrument or obligation in a final judgment of dissolution make the former spouse an irrevocable beneficiary?
- Following entry of the final judgment of dissolution or annulment, did the decedent sign a new designation expressly naming the former spouse as beneficiary?
- Does a final judgment or settlement agreement obligate the insured to keep the former spouse or minor children as irrevocable beneficiaries?
- Does the final judgment require the insured to maintain the policy for a former spouse’s benefit or for the benefit of any minor children?
- Under the terms of the final judgment, could the decedent unilaterally have terminated or modified ownership of the asset without anyone else’s prior knowledge and consent?
- Are other assets of the decedent available to fulfill such requirement for the benefit of the former spouse or minor children?
- Is the beneficiary designation irrevocable under applicable law?
- Is the contract or agreement governed by state law other than Florida?
- Does operation of law vest ownership of an asset in one or more surviving co-owners?
- Did the decedent remarry the former spouse and were they married to one another at the time of death?