An important dispute when a person dies is often who gets the life insurance policy death benefit. The life insurance policy may have been purchased decades ago and name the insured’s former spouse, from whom the insured was divorced long ago. The insured’s children or other alternate beneficiaries often argue the insured really intended the death benefit go to them, not to the spouse they divorced decades before their death.
To avoid this uncertainty, Washington State, like many states, has a law providing that life insurance beneficiary designations to spouses are automatically void upon divorce. Thus, if a married person buys a life insurance policy providing the insurer pays her husband upon her death, and subsequently divorces her husband, the husband is automatically removed as the beneficiary upon the divorce. This avoids a potential probate court fight when the insured dies.
On June 11, 2018, the U.S. Supreme Court decided Sveen v. Melin, upholding a similar law in Minnesota. The Supreme Court confirmed states like Washington may provide that life insurance beneficiary designations to spouses automatically terminate upon divorce.
In Sveen, Mark Sveen was married to Kaye Melin in 1997. Sveen purchased a life insurance policy naming Melin as the primary beneficiary and his two children from a prior marriage as contingent beneficiaries. Sveen and Melin divorced in 2007, but their divorce failed to address the life insurance policy. Sven never amended the policy’s beneficiary designation. After Sveen died, his children and Melin made competing claims for the life insurance policy death benefit.
Under Minnesota law, the divorce automatically revoked Sveen’s designation of Melin as his primary beneficiary, resulting in Sveen’s children receiving the life insurance policy death benefit. Melin argued the law violated the U.S. Constitution’s “contracts clause” because the law was enacted after the policy was purchased.
The court upheld the law. Reviewing the long history of state laws presuming “that the average Joe does not want his ex inheriting what he leaves behind,” the court observed these laws have utility in simplifying probate litigation by giving certainty about decades-old life insurance policy benefits. The court noted Minnesota’s law allowed Sveen to re-designate Melin as his beneficiary after the divorce if he desired, so it imposed only a minimal burden on existing contracts.
The court’s decision to uphold Minnesota’s law provides additional certainty to Washington insureds and their heirs and beneficiaries regarding the treatment of life insurance death benefit proceeds.
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