Collaborative Marital Settlement Agreements: Insurance Policies

Baby and black lab sitting in field of purple flowers. Collaborative Marital Settlement Agreements Insurance Policies.

On divorce, Florida law automatically revokes beneficiary designations under insurance policies in favor of an ex-spouse. But you and your spouse may say in your collaborative marital settlement agreement you intend to designate one or the other as beneficiary. Otherwise, on entry of a final judgment of dissolution of marriage, most insurance policy beneficiary designations of an ex-spouse end.

Therefore, consider overriding automatic revocation of beneficiary designations under insurance policies. After divorce, you may want the insured policy holder to redesignate a spouse as beneficiary. For example, you may decide you’d like to secure alimony or child support with life insurance. To achieve that goal, keeping your ex-spouse as beneficiary may make sense.

Florida’s Automatic Revocation Statutes – Life Insurance and Accounts, Wills, and Revocable Trusts

Florida Statutes Section 732.703 of the Florida Probate Code revokes on divorce designations of an ex-spouse under financial instruments such as life insurance policies, individual retirement accounts (IRAs), and pay on death accounts. For further discussion, read how the statute applies and exceptions here.

Toddler son riding piggyback on shoulders of dad. Florida Divorce Wills Trusts Automatic Revocation of Beneficiary Designations After Divorce.

As your collaborative divorce team considers automatic revocation of insurance policy designations on divorce, it should also consider related statutes.

First, section 732.507, Florida Statutes, also in the Florida Probate Code, applies to will provisions that affect an ex-spouse.  

Second, section 736.1105, Florida Statutes, in the Florida Trust Code, applies to designations of an ex-spouse under revocable trusts. The Florida Legislature amended both sections effective July 1, 2021. See Laws of Florida 2021-183.

Statewide Automatic Revocation Statutes

Here is a chart of state automatic revocation statutes.

States Enactment - Automatic Revocation of Beneficiary Designations of Ex-Spouse on Divorce

Florida is one of 27 states with an automatic revocation on divorce statute substantially similar to the Uniform Probate Code’s Section 2-804. To read Section 2-804, please click here.

See Ala. Code § 30-4-17; Alaska Stat. § 13.12.804; Ariz.Rev.Stat. § 14-2804; Colo.Rev.Stat. § 15-11-804; Haw.Rev.Stat. § 560:2-804; Idaho Code § 15-2-804750 ILCS Illinois Marriage and Dissolution of Marriage Act 5/503(b-5)(2) (effective January 1, 2019)(life insurance policies) and 755 ILCS 5/4-7(b) (wills); Iowa Code § 598.20A, Iowa Code § 598.20B, and Iowa Code §633.271; Mass. Gen. Laws, ch. 190B, § 2-804; Mich. Comp. Laws Ann. § 700.2806 and Mich. Comp. Laws Ann. § 700.2807; Minn. Stat. § 524.2-804 subd. 1; Mont. Code Ann. § 72-2-814; Nev. Rev. Stat. § 111.781; N.J. Stat. Ann. § 3B:3-14; N.M. Stat. Ann. § 45-2-804; N.Y. Est., Powers & Trusts Law Ann. § 5-1.4; N.D. Cent. Code § 30.1-10-04; Ohio Rev. Code § 5815.33; 20 Pa. Stat. and Cons. Stat. § 6111.2; S.C. Code § 62-2-507; S.D. Codified Laws § 29A-2-804 ; Tex. Fam. Code § 9.301 and Tex. Fam. Code § 9.302 (retirement benefits and financial plans); Utah Code § 75-2-804; Va. Code § 20-111.1 ; Wash. Rev. Code § 11.07.010; Wis. Stat. § 854.15.

US Supreme Court Sveen v. Melin Decision

But are these automatic revocation statutes constitutional?  After considering the question in Sveen v. Melin, 138 S. Ct. 1815 (June 11, 2018), the US Supreme Court answered “yes.”

In Sveen, the Supreme Court held Minnesota’s statute (similar to Florida’s) automatically revoking certain insurance beneficiary designations did not unconstitutionally impair contracts. The Court further held, as applied to life insurance beneficiary designation signed before the Minnesota’s statute became law, the statute did not violate the Contracts Clause of the United States Constitution. See Cazobon, Denise B. and Stashis, Alfred, Jr., Beneficiary Designations in Divorce: Lessons from Sveen v. Melin, Family Law Commentator, Fall 2018, p. 11.

On remand, the Eighth Circuit Court of Appeals upheld awarding the policy proceeds to Mr. Sveen’s children, rather than to his ex-wife. See Metropolitan Life Ins. Co. v. Melin, 899 F. 3d 953 (8th Cir. 2018). See also Blalock v. Sutphin, 275 So. 3d 519 (Ala. 2018) (affirming trial court’s order that decedent’s daughter was the sole beneficiary of New York Life whole life insurance policy, because decedent’s designation of his ex-wife, before they divorced, as beneficiary was automatically revoked under Alabama’s revocation on divorce statute).

Automatic Revocation on Divorce – Uniform Probate Code, Section 2-804

The Uniform Probate Code provision revokes upon divorce:

  1. testamentary bequests in wills and
  2. nontestamentary (intervivos) beneficiary designations to a former spouse.

See §§ 2‑804(a)(1), (b)(1), 8 U.L.A. 330, 330-331.

Section 2-804 revokes rights of a former spouse (and the former spouse’s relatives) to take under wills (“testamentary” transfers) and revocable transfers a person provides for while alive (“intervivos transfers”). Intervivos transfers include beneficiary designations under revocable trusts, life insurance policies, or retirement plans. See General Comment, Part 8, Uniform Probate Code (1969) (Last Amended or Revised in 2019), National Conference of Commissioners on Uniform State Laws.

UPC Rewrite in 1990: Expands Automatic Revocation to Will Substitutes

The 1969 Uniform Probate Code underwent a rewrite in 1990. Before 1990, Section 2-508 revoked devises by will to a former spouse. In 1990, the Joint Editorial Board for the Uniform Probate Code (now the Joint Editorial Board for Uniform Trust and Estate Acts) and a special Drafting Committee to Revise Article II substantially revised Section 2-804.

The revisers expanded the provision to “will substitutes,” such as revocable trusts, life insurance designations, retirement plan beneficiary designations, transfer-on-death accounts, and other revocable dispositions made before the divorce. See General Comment, Part 8, Uniform Probate Code (1969) (Last Amended or Revised in 2019), National Conference of Commissioners on Uniform State Laws.

To avoid automatic revocation on divorce, what can collaborative teams do avoid consequences spouses don’t intend?  For more, read about options couples and their collaborative team might consider.

Costly Assumptions – Make Things Clear!

Opportunity in Collaborative Divorce to Override Automatic Revocation of Insurance Beneficiary Designations

You may want to override automatic revocation statutes. That is, in your collaborative marital settlement agreements, as the insurance policyholder, you may commit to reinstating your ex-spouse as beneficiary.  However, when you fail to express what you want in your collaborative settlement agreement, unfortunate consequences may follow.

Pitfalls In Failing to Address Automatic Revocation of Insurance Policy Designations on Divorce

To illustrate the pitfalls, consider an Alaskan ex-wife’s experience.  She thought her divorce settlement agreement expressly awarded her a Transamerica life insurance annuity policy held at Merrill Lynch. But she learned Alaska’s revocation-on-divorce statute killed her complaint against Merrill Lynch, its employee, and her ex-husband’s girlfriend, whom he named beneficiary after the divorce and 3 days before he died.

The problem? The ex-wife’s divorce settlement agreement did not mention the Transamerica life insurance annuity. Instead, the agreement awarded her the value of “all retirement accounts which exist as of December 31, 2004.” The agreement specified profit sharing, IRA, 401(k), and Merrill Lynch accounts.  But the agreement failed to specify the annuity policy at issue, held in the Merrill Lynch account the parties agreed the ex-husband would keep.

Unfortunately for the ex-wife, the court rejected her contention that her ex-husband’s meant to keep her as the beneficiary and to avoid the revocation-on-divorce law. In support, she showed he kept her as the listed beneficiary for 13 years after the divorce and only removed her name when he was on his deathbed. See Snead v. Wright, 427 F. Supp. 3d 1133 (D. Alaska December 3, 2019). The court held the written beneficiary designation controlled.

Conclusion: Consider Automatic Revocation in Collaborative Marital Settlement Agreements

In sum, it’s not enough or wise to assume intent not expressed in writing will override automatic revocation on divorce. Instead, if spouses want to override automatic revocation, they need to express that in their settlement agreement.

Assuming things can be costly! So, to avoid costly assumptions, divorcing parties may want to override Florida’s (or other states’) automatic revocation of beneficiary designations under insurance policies. That means, before entry of a final judgment, a policyholder may commit to redesignating, after the divorce is final, a former spouse as beneficiary.  For example, the collaborative team may consider and discuss language here.

Questions About Post-Divorce Designations?

For questions about options for handling beneficiary designations in your Florida Collaborative Divorcecontact Michael P. Sampson.

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