The Impact of Divorce on Group Life Insurance

 In General

Divorce -documentsIf you’ve gone through a divorce, you know there are many details involved in the division of assets.  Sometimes, things fall through the cracks; one of those things can be updating beneficiary designations.  Did you update your Beneficiary Designations post-divorce?  All of them?  If you aren’t sure, then make today the day.  Here’s why: if you have neglected to update a beneficiary designation that currently names your ex-spouse, you leave the door open for confusion and may be taking some unnecessary risks.  A case out of Michigan demonstrates that this issue especially important when it comes to group life insurance.  Let the cautionary tale of Gary Vassil illustrate.

Gary Vassil died in 2016, leaving behind three children.  As his estate was being processed, a group life insurance policy was discovered.   In 1997, Gary had named his then-wife the beneficiary of 83% of his group life insurance; his three children would divide the remaining 17%.  But when he divorced in 2003, he neglected to update his beneficiary forms.  In fact, for thirteen years he neglected to update the forms.

In fairness to Gary, he may have made a fairly reasonably assumption that it would “go without saying” that he no longer wished his ex-wife to receive any of the life insurance benefit, let alone 83%. The plan administrator didn’t see it that way.  The ex-wife apparently didn’t see it that way either – she refused to sign a waiver of beneficiary rights.  I have no defense for the ex-wife’s actions, but in fairness to the insurance company, they were obeying the law.  Gary’s three children, confident their dad had no intent that any of the death benefit would go to the ex-wife, filed a lawsuit.

Since you already know the outcome wasn’t good, why didn’t the court find for the children?  Quite simply, the law was clear on the matter.  Federal law contradicted Gary’s seemingly reasonable assumption, mandating that death benefits of a life insurance policy shall go directly to the employee’s named beneficiaries without prejudice or inference.   Furthermore, it required an express revocation of any beneficiary status of the ex-spouse to-be within the divorce decree itself to rebut any claim of a mistaken beneficiary designation.

Beneficiary designations are so important to keep up-to-date.  That’s why The Weeks Law Firm will take every opportunity to remind you of this fact.  Have I convinced you that a thorough inventory of all your beneficiary designation forms might be worth the time?

Recent Posts