Life Insurance Policies in a Divorce Can be Considered Marital Property
Key Points
  • In some instances life insurance can be considered property for equitable division purposes. In this instance the court may order that the beneficiary for the life insurance policy not be changed. If a spouse changes the beneficiary it can be a violation of a court order.
  • Be careful, since a life insurance policy may not have any current value (only value after a person dies), there may be no violation of a court order if a beneficiary is changed, as it really is not transferring property. Changing the beneficiary on a life insurance policy is not necessarily considered disposing of marital assets.
  • When in the midst of a divorce make sure that the terms are very clear and no misinterpretation can be made when it comes to life insurance and changing beneficiaries.

A number of states have statutes that automatically restrain a spouse from transferring marital or community property during the pendency of the divorce proceedings. E.g., Colo. Rev. Stat. 14-10-107(4)(b); 13 Del. Code 1509; 750 Ill. Comp. Stat. Ann. 5/501.1; Or. Rev. Stat. 107.105(1)(f). In some other states, a spouse may petition for such an injunction. E.g., Ariz. Rev. Stat. 25-315(A); Cal. Civ. Code 4359; Ga. Code Ann. 19-1-1; Ind. Code Ann. 31-1-11.5-7; N.J. Stat. Ann. 15-55-20(10); N.Y. Dom. Rel. Law 234; Va. Code Ann. 20-103; Wash. Code Ann. 26.08.110; (8) W. Va. Code 48-2-34. In all states, the court certainly has the equitable power to grant such an injunction.

If an injunction does not specifically prohibit a spouse from changing beneficiaries, e.g., Candler v. Donaldson, 272 F.2d 374, 376-77 (6th Cir. 1959) (order expressly directed insured to maintain all insurance policies during pendency of divorce; subsequent change of beneficiary therefore violated court order); Webb v. Webb, 375 Mich. 624, 134 N.W.2d 673 (1965) (enumerated within complaint and addressed in restraining order was prohibition from changing beneficiary on life insurance policy and retirement annuity contract); Hook v. Hook, 35 Ohio App. 3d 51, 519 N.E.2d 687 (1987) (ex parte temporary restraining order prohibited husband from changing beneficiary); Estate of Korzekwa v. Prudential Insurance Co. of America, 669 S.W.2d 775 (Tex. App. 1984) (temporary restraining order prevented husband from changing beneficiary designation on any life insurance policy); Standard Insurance Co. v. Schwalbe, 110 Wash. 2d 520, 755 P.2d 802 (1988) (preliminary injunction specifically ordered parties not to "change entitlements" on any insurance policies of either party); see also Edinburgh v. Massachusetts Mutual Life Insurance Co., 22 Mass. App. Ct. 923, 492 N.E.2d 1182 (1986) (change of beneficiary by husband was accomplished before restraining order entered), there is a split in authority as to whether such general injunction prevents a spouse from changing beneficiaries during the pendency of the divorce.

The majority rule that has emerged is that where an injunction is couched in very general terms restraining a party from conveying or disposing of property, then a change in beneficiary is not a violation of the injunction for the simple reason that a change in beneficiary is not a transfer of property. The leading case stating this rule is Metropolitan Life Insurance Co. v. Tallent, 445 N.E.2d 990 (Ind. 1983). In that case, the restraining order prevented the parties from "transferring, encumbering, and concealing or in any way disposing of any property except in the usual course of business or for the necessities of life." Id. at 991. The husband thereafter changed the beneficiary of his life insurance policy from his wife to his mother. One month later, during the divorce proceedings, the husband died. The husband did not violate the order, the court held, because the husband had not disposed of "property". The life insurance policy had no present value, payment of the proceeds was contingent on the husband’s death, and there was no right to withdraw or receive benefits. Hence, the policy was not property, and a change in beneficiary could not be considered a violation of the restraining order. Many other cases have followed this reasoning. For example, in Lindsey v. Lindsey, 342 Pa. Super. 72, 492 A.2d 396 (1985), the court held that changes in beneficiaries on life insurance policies were not disposals of marital assets in violation of a preliminary injunction in a divorce action enjoining the husband from disposing of any marital property.

The court reasoned that naming a beneficiary or changing a beneficiary is not a conveyance of an asset, and, therefore, the injunction did not act to restrain the husband from changing the beneficiary designation on two life insurance policies. Accord Pope v. Cauffman, 885 F. Supp. 1451 (D. Kan. 1995) (injunction that restrained each party from "selling, encumbering or disposing of the parties’ property" did not prevent husband from changing beneficiary of life insurance policy); Succession of Jackson, 402 So. 2d 753, 756-57 (La. Ct. App. 1981) (injunction protecting community estate did not encompass right to change beneficiary); Gleed v. Noon, 415 Mass. 498, 614 N.E.2d 676, 677 (1993) (injunction which restrained the parties from "withdrawing, transferring, conveying, assigning, spending, encumbering, pledging, bequeathing or otherwise divesting themselves of any assets in which they have acquired an interest during their marriage to each other and which are subject to division" did not restrain husband from changing beneficiary of employee pension plan); Bishop v. Eckhard, 607 S.W.2d 716, 717-18 (Mo. Ct. App. 1980); Balfany v. Balfany, 239 Neb. 391, 476 N.W.2d 681 (1991) (order prohibiting parties from "concealing, encumbering, hypothecating, conveying or disposing of any property of the marriage" did not prevent husband from changing beneficiary from wife to father); Bell v. Bell, 896 S.W.2d 559, 564 (Tenn. Ct. App. 1994) (general injunction does not prevent change in beneficiary, as life insurance proceeds are mere expectancy, not property).

Some cases have disagreed and held that general restraining orders and injunctions, prohibiting a transfer of property and interests, are broad enough to include a change of beneficiary on a life insurance policy. See, e.g., Candler v. Donaldson, 272 F.2d 374 (6th Cir. 1959); Mack v. Allstate Life Insurance Co., 42 Ohio App. 3d 101, 536 N.E.2d 671 (1987).

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