Recent Court Ruling Underscores the Need to Update Life Insurance Policy Beneficiaries
Purchasing life insurance coverage is a decision that too many Americans forget to activate, but keeping this often forgotten policy up to date in terms of common life changes can be even more challenging to remember.
According to laws in the Commonwealth of Va., life insurance policyholders donâ€™t have to update their life insurance policy beneficiaries in the event of a remarriage. A recent U.S. Supreme Court ruling, however, may say otherwise.
Jacqueline Hillman found that out the hard way. When herÂ husbandÂ passed away, the court awarded the insurance benefits to herÂ husbandâ€™s ex-wife,Â since she was still the named beneficiary on the policy.
Beneficiary on Life Insurance Policy Goes Unchanged
In Hillman vs. Maretta, U.S. Supreme Court, No. 11-1221, June 3, 2013, Warren Hillman named his then-wife, Judy Maretta, as the beneficiary on his life insurance policy. The couple divorced in 1998. Since Virginia law requires a named ex-spouse to hand over any life insurance benefits to any current spouse that may exist, those benefits should have gone to Warren’s second wife, Jacqueline, at the time of his death. This may be why Hillman took no action in changing the beneficiary of his policy, despite remarrying in 2002.
Federal Laws Supersede State Laws
[relatedposts]When Hillman passed away in 2008, a dispute arose about who should get his life insurance policy benefits, written through Federal Employeesâ€™ Group Life Insurance policy. Since the insurance policy was created under the Federal Employeesâ€™ Group Life Insurance Act, and federal laws supersede state laws, the Supreme Court ruled unanimously that the provisions of the life insurance policy must be followed.
Ensure Life Insurance Policy Benefits Go to the Right Person
This case reminds policyholders that they must be vigilant is ensuring their life insurance is up to date. When life circumstances change, review all assets and make the appropriate changes.
Life insurance policies, 401(k) plans, bank accounts and other assets must be changed in order to direct policy proceeds into the hands of the intended beneficiary.