Estate planning is an important step for any adult, as it can make sure that your friends and family members are taken care of after you pass away, designate particular people to make decisions on your behalf, and lay out your health care preferences, just to name a few. Purchasing a life insurance policy is a common component of estate planning. During marriage, it is common for spouses to name each other as beneficiaries as life insurance policies. However, if the parties then divorce, it is not uncommon for parties to forget to change the beneficiary named on their policies. In recognition of this common problem, Minnesota passed a law to provide that if after a divorce a person never changes a beneficiary designation from a now-former spouse, the court will disregard the beneficiary designation of the former spouse and the proceeds of the policy will pass to the estate of the deceased and be distributed from there. The law was challenged in a case styled Sveen v. Melin which went all the way to the United States Supreme Court.
In Sveen v. Melin, the parties were married. During the marriage, the husband purchased a life insurance policy and named his wife, Melin, as beneficiary, with his adult children from a prior marriage as contingent beneficiaries. The parties then divorced. Minnesota then passed the law concerning the change of a beneficiary and life insurance policy. Sveen then passed away. The insurance company filed a suit to determine if the new Minnesota law applies to Sveen’s life insurance policy, although the law was not in effect when the insurance policy was in effect. In an 8-1 decision, the Supreme Court decided that it is permissible for states to pass laws that retroactively modify the beneficiary designation on a non-probate asset without ever attempting to ascertain the actual intent of the deceased. What this means for divorcing couples is that if you or your spouse have a life insurance policy that designates your soon to be former spouse as the beneficiary, you must take additional steps following your divorce if you want to make sure your former spouse will still be named as the beneficiary on your insurance policy. When the parties share minor children, it is likely that one or both parents are required to carry life insurance for the benefit of the children in case one of the parents passes away before the children turn eighteen.
Call us today at 651-371-9117 for a consultation. We have extensive experience helping our clients to understand how estate planning interacts with divorce and can answer your questions.