Divorce Source: Divorce and the Award of the Life Insurance Policy

Key Points

Life insurance and divorce seems to have sticking points. Who is the owner, if the spouse can change the beneficiary; there are many issues that come with awarding life insurance policies in divorce.

When a divorce decree awards a life insurance policy to one spouse as an item of property, the question arises as to whether the award to the one spouse divests the other spouse of rights as named beneficiary. See generally Annotation, Divorce Decree Purporting to Award Life Insurance to Husband as Terminating Wife-Beneficiary’s Rights Notwithstanding Failure to Formally Change Beneficiary, 70 A.L.R.3d 348 (1976 & Supp. 1999).

Several courts considering this issue have held that a dissolution court’s division of the parties’ life insurance policies does not, by itself, affect a beneficiary interest; rather, some additional language addressing this expectancy interest is required or the beneficiary spouse must have waived this interest as part of a stipulation or settlement.

Christensen v. Sabad, 773 P.2d 538, 540 (Colo. 1989) (en banc) (holding award of life insurance policy to decedent husband in dissolution proceeding did not extinguish ex-wife’s expectancy as a beneficiary of the policy);
In re Estate of Schleis, 97 N.M. 561, 642 P.2d 164, 165 (1982) (holding "divorce decree granting the insured spouse ownership of [life insurance] policies does not, by itself, sever the beneficiary interest of former spouse");
Lewis v. Lewis, 693 S.W.2d 672, 674 (Tex. App. 1985) (holding designation of wife as beneficiary not affected by divorce decree granting husband "any and all policies of life insurance");
Aetna Life Insurance Co. v. Wadsworth, 102 Wash. 2d 652, 689 P.2d 4 (1984) (division of community property does not work to divest spouse of beneficiary interest, which is not community property);
Bersch v. VanKleeck, 112 Wis. 2d 594, 334 N.W.2d 114, 117 (1983) (holding divorce decree awarding insurance policies to husband dealt with ownership interest only and did not affect ex-wife’s beneficiary interest).

On the other hand, some courts have held that a decree granting one spouse ownership of a life insurance policy terminates the other spouse’s rights as beneficiary.

Matter of Estate of Dobert, 192 Ariz. 248, 963 P.2d 327 (Ct. App. 1998) (wife had no expectation of benefits when divorce decree awarded husband his life insurance policy);
Larsen v. Northwestern National Life Insurance Co., 463 N.W.2d 777 (Minn. Ct. App. 1990);
Estate of Keeton v. Cherry, 728 S.W.2d 694 (Mo. Ct. App. 1987);
McDonald v. McDonald, 632 S.W.2d 636 (Tex. App. 1982);
Novotny v. Wittner, 731 S.W.2d 103 (Tex. App. 1987).