How important is a divorce decree to determine beneficiary?

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PostPosted: Wed Jan 13, 2010 3:15 am   Post subject: How important is a divorce decree to determine beneficiary?  

My stepfather died leaving his ex-wife as beneficiary (he never changed it to my mother as they were only married 4.5 months.)



However, the divorce decree clearly states that as part of the divorce the former wife has no rights to any life insurance policy.



So... would the policy end up being paid to his current wife (my mother) or the estate (of which my mother is the rep) or what?



Anyone? Thanks in advance.


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PostPosted: Wed Jan 13, 2010 3:35 am   Post subject:   

Divorce decree means little to nothing at this point. The beneficiary designation will most likely stand and his ex wife will receive the funds.



If the insurance company has already cut the check, your chances of having anything end up in your mother's hands is nil.



Benefiary designations trump legal documents. Your dad could have signed a will a month ago naming your mother the heir to all his assets and the person to receive his life insurance proceeds, without a change in beneficiary on his actual policy, the Will, and any other document accomplishes nothing.



Sorry for the bad news.

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PostPosted: Wed Jan 13, 2010 3:42 am   Post subject:   

There has been no check cut. The insurance company asked if she wanted to contest the status (or whatever the term is) and sent her papers to open a case contesting it. It asked for her reason to contest it and now everything (dispersement) is on hold.



Interesting that they would do this if the divorce decree means nothing.



Thanks for the input. Much appreciated.

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PostPosted: Wed Jan 13, 2010 3:52 am   Post subject:   

By means nothing I mean holds no legal authority. Since money has not been paid, there's a chance you could use the decree as supporting evidence that the beneficiary was due to be changed.



Fight like hell if you have to. Then make sure your beneficiary designations are current, and remind all your friends to do the same. We see a lot of people upset over outdated beneficiary designations. Thinking they were to receive money because they were once told that was the plan, or maybe there was a Will, but without the beneficiary change they saw nothing.



The good news is, you guys caught this at a crucial stage. Good luck.

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PostPosted: Thu Jan 14, 2010 4:52 am   Post subject:   

I learned something interesting today that I wonder if it could have any bearing on this whole thing.



I learned that the ex-wife went down to the company where my step-father worked (a major auto maker) and claimed that she was still married to him and signed up to get pension benefits. They actually sent her the first check which went tomy mom's house.



So she basically defrauded the company to get benefits that were not hers (she admitted to her son that the lied to get the money.) Is this something that the insurance company should know or would it not matter to them at all?



Thanks again.

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PostPosted: Thu Jan 14, 2010 11:23 am   Post subject: insurance  

That's horrible!! How can someone, with a conscience, do something like this?! yes...I think it IS something the Insurance Co should know. However....you said they were NOT married?..correct? When she went to the workplace, they didn't question her about what she was doing, etc?

Quote:
she admitted to her son that the lied to get the money.)
Would her son write some kind of statement to about this?! Gosh...Life Insurance does bring out the 'darkness' in people, sometimes.
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PostPosted: Thu Jan 14, 2010 6:32 pm   Post subject:   

Yes, they were no longer married. They were divorced in 2007 and there is a provision (line item) that states that she loses all claims to pension, life insurance etc.



I am not sure how she got away with it really. She did file under her old married name although when they were divorced it was stated that she would return to using her maiden name which she has until now.



And sadly enough the woman is all but estranged from her son, so yes he'd gladly make this statement.



Very unfortunate indeed.

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PostPosted: Thu Jan 14, 2010 10:22 pm   Post subject:   

I still see potential problems in getting the life insurance company to pay the benefit to your mom instead of the named beneficiary. This story might strike a cord with someone in processing, but it's ability to sway them, from a legal stand point, isn't much. Character assassination isn't exactly a means of getting the insurance company to overlook obligations in a contract.



Here's the issue from their stand point. Legally, the named beneficiary is this ex wife. By law she's got a right to the benefit because the contract says she does. Now, there is a document, the decree which states that the insured and owner of the policy wouldn't want his ex wife to be the beneficiary of his policy. BUT...she still has a right to it so long as she's the named beneficiary. Insurance companies are ripe targets for lawsuits (all that money makes you a neon deer in the middle of an open field on the opening day of hunting season). Their decision on who or how to pay will focus on what the minimal legal recourse would be.



Say they got sued by the ex wife for not paying her the benefit. What's there defence? That a legal document that doesn't hold water to the original contract stipulated that she wasn't supposed to be the beneficiary?



I'm sorry to sound like I'm cheering against you, but if you believe that the word of a contract should be followed, payment to the ex wife is basically how this should work. Her keeping it would be sick and unfortunate.

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PostPosted: Fri Jan 15, 2010 3:25 am   Post subject:   

"she still has a right to it so long as she's the named beneficiary."



Perhaps I'm viewing it differently but the divorce decree is also a legal, binding contract which she signed giving away any such rights. The decree doesn't say that he "wouldn't want her to be the beneficiary"- the decree states that she agreed that she was giving up all rights to the benefits by signing it- which she did.







"I'm sorry to sound like I'm cheering against you."



I don't view it that way at all, I appreciate your input- I'm not looking for people to agree with me, just advice from those who know more than me.



And character assassination and pulling heartstrings isn't what I had in mind. The woman has now said that she was planning on getting back with my stepfather and other things so I wouldn't put it passed her to say anything to get her way. I just didn't know if the pension issue should be brought up.



She's finally going to meet with an attorney tomorrow. She's ready for whatever comes and I've warned her that it might not work out for the positive, no biggee.



And again- thanks for the input!

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PostPosted: Sat Jan 16, 2010 2:04 pm   Post subject: insurance  

I would think (but, remember..I'm not an Expert..) that whatever it says in the Divorce decree is binding....it would state who is the Beneficiary of a Life Insurance policy, who gets what properties, etc.

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PostPosted: Sun Jan 17, 2010 1:07 am   Post subject:   

It is correct to point out that a divorce decree is a legally binding contract. However, what we have to remember is that the life insurance contract is also a legally binding contract, which will follow through on it's obligations.



The life insurance contract states that the life insurer will pay a benefit amount to a beneficiary upon the receipt of proof that the insured person has died. Their obligation is to pay the benefit to the beneficiary who is named in the contract. Intent isn't exactly their concern.



The divorce decree is a contract that stipulates certain obligations or agreements upon divorce. Now, like a Will--which stipulates how one wishes to have their assets distributed--the decree can be in contradiction to the life insurance contract. This has been tested in the past, and the contractual obligation of the life insurance contract has been upheld.



I would bet that the only thing the divorce decree speaks to is the agreement of the ex wife to give up interest in assets and give up any rights as a beneficiary, perhaps even an irrevocable beneficiary (very rare circumstance that a document like a divorce decree likely cannot overturn). Just because the ex wife has agreed to relinquish interest in her ex husband's assets or life insurance benefits, it's still up to the husband to change beneficiary designations.



The one saving grace this situation might have is the request made to begin the process to change beneficiary. It's still iffy.

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PostPosted: Sun Jan 17, 2010 2:58 pm   Post subject:   

A divorce decree is a contract between the parties getting divorced.



An insurance policy is a contract between the owner of the policy and the insurance company.



The insurance company must abide by the terms of the insurance contract. They are not a party to the divorce decree so without a court ordering them to do something different, they must pay to the beneficiary.


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PostPosted: Sun Jan 17, 2010 10:14 pm   Post subject:   

The attorney feels that since the the divorce followed the original assignment of her as beneficiary that it would negate the standing. Unfortunatley I wasn't there to address the info I've been given here.



So assuming the ex-wife gets the check, given the divorce decree is there a cause of action against the ex-wife on behalf of the estate for keeping or accepting monies she's given up all rights too? I understand of course we're probably treading into territory that exceeds the nature of the forum.

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PostPosted: Sun Jan 17, 2010 10:45 pm   Post subject:   

That's a question that would most likely require legal action and a court decision, or settlement between parties.



The rule is money gets paid to her. The grey area is, as you've decribed, she's legally agreed not to accept it.

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PostPosted: Mon Jan 18, 2010 9:57 am   Post subject:   

Quote:
I learned that the ex-wife went down to the company where my step-father worked (a major auto maker) and claimed that she was still married to him and signed up to get pension benefits. They actually sent her the first check which went to my mom's house.




This violates federal law which, in the absence of the new wife's affirmative act of signing away her right to the assets/benefits, makes the current lawful spouse the de facto beneficiary of retirement plan assets/benefits. If the statements above are factual, the new wife would have a cause of action against the pension plan trustee for any monies actually received by the ex-wife, and the pension plan trustee, in turn, would have a cause of action against the ex-wife who had no legitimate claim to the benefits. There is no similar requirement of federal law regarding life insurance proceeds. Recovering the money is an entirely different story, especially after it's been spent.



Quote:
A divorce decree is a contract between the parties getting divorced.




Although it might be thought of as such, technically speaking, this is not correct, since marriage is, technically speaking, not a contract but an agreement. A divorce decree is simply a civil court order ("decree"), not a contract, which must be recognized by other courts or jurisdictions as taking precedence over the prior agreement it negates, such as the mutual agreement to be married.



Courts do not generally have authority to order insurance companies to pay policy proceeds to persons other than the named beneficiaries, although they do have the authority to find/declare a named beneficiary as "disqualified" from receiving the proceeds -- as in the case of a criminal act on the part of the beneficiary that leads directly to the payment of policy proceeds (just ask Scott Peterson how much of Laci's life insurance proceeds he was able to take to state prison following his conviction for her murder) -- and if declared disqualified, an insurance company would be legally prevented from paying the proceeds to that person.



Some states, like New York, have laws that require insurance companies to abide by divorce decrees if they have been properly served on the insurance company by the party which will ultimately benefit, such as an irrevocable beneficiary.



Having said all this, as BNTRS pointed out, keeping one's beneficiary(ies) current with one's insurance company, pension plan trustee, and/or retirement plan custodian is the best recommendation we as agents can make.


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