SCOTUS looks at insurance benefits in divorce

Dec 11 2017 - Posted by , in Divorce, Tagged in Divorce

Divorce is the legal process by which a marriage contract is dissolved. Anyone who has been through the process knows that it can tend to get complicated. The older a divorcing couple happens to be, the more intertwined their assets are. That can require finding solutions for dividing property that require zigging and zagging through assets to achieve an equitable balance. If some individual asset happens to fall through a crack, it can trigger disputes later that only the courts can resolve.

Just such a case has arrived at the U.S. Supreme Court. Because of similarities in the laws that are in effect in Texas and the state from which the case originates, we are sure attorneys across the Lone Star state will be watching to see the outcome.

The issue

At its core, the question before the high court is whether a so-called revocation-upon-divorce statute can be applied retroactively to a contract signed years before the law was enacted, or whether such a law violates the Contracts Clause of the U.S. Constitution.

The details of the case out of Minnesota are these. A husband contracted for a life insurance policy in 1998 and named his then-wife as the beneficiary. Nine years later, the couple divorced, but the husband never removed his wife as the designee. The legal bump in the road is that in 2002, state law was changed to add a provision stating that a divorce settlement automatically revokes life insurance beneficiary designations.

When the ex-husband died in 2011, both the ex-wife and the man’s adult children made claim to the insurance payout. The initial court decision went to the children, but an appeals court reversed in favor of the ex-wife earlier this year. The panel of judges invalidated the retroactive application of the 2002 revocation-upon-divorce statute to the 1998 insurance policy – noting the Contracts Clause of the Constitution forbids a state law from breaching a contract.

There is no predicting how the Supreme Court will ultimately rule on this matter. What is clear is that because most states in the country have similar revocation-upon-divorce statutes, the decision could have a significant impact.

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