At time of divorce it is important to review the beneficiary of any life insurance

In the June 16, 2009 published appellate opinion in Hadfield v. The Prudential Insurance Company, the ex-wife argued that she was entitled to proceeds from a life insurance policy for her divorced ex-husband because she had been named as the beneficiary prior to divorce, the beneficiary designation had not been changed post-divorce and the parties had agreed they would each remain as beneficiaries on each other’s life insurance until they remarried.

The parents of Ryan Hadfield on behalf of his Estate argued that after his divorce he had attempted to change the name of the beneficiary of his life insurance from his ex-wife to his sister but had executed the forms incorrectly.

The trial court found in favor of the Estate finding that under N.J.S.A. 3B:3-14, the divorce revoked the insurance beneficiary designation.  On appeal, the appellate division agreed, finding that the ex-wife had “no vested right in the life insurance policy since Ryan could have validly changed his beneficiary at any time prior to his death.”

Furthermore, because the ex-wife had no vested right to the life insurance, the court held that it was not improper to retrospectively apply the amendment of N.J.S.A. 3B:3-14 that occurred in 2005 in which life insurance policies were specifically named as instruments that were revoked upon divorce.

The starting point to this decision focuses on the concept of a "vested interest" in the life  of the other party.  In this case, since there was no obligation upon the Husband to pay support to the Wife after divorce, nor were there any outstanding obligations owed by the Husband to the Wife under the terms of the settlement agreement, what was Wife's vested interest in his estate?

The appellate court confirmed that since there was no vested interest in his estate, what was the former wife's entitlement to continued beneficiary coverage under his will?  Since there was no clear proof of an intent to continue to designate the former wife as beneficiary (after the divorce), her claims had to fail. 

Simply stated though, it would have been better practice for the Husband to have prepared a new will and a change in his beneficiary designation in his life insurance policy, confirming his intent to remove the former wife as beneficiary of his estate to avoid any future conflict.

If you have any questions about this topic, or any other family law related topics, please visit our website at www.diamondanddiamond.com, or to schedule a consultation with Richard Diamond, please contact us by phone at (973) 379-9292, or email us by clicking here.

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