I'm Getting A Divorce In Florida And Have Life Insurance. Now What?
Life Insurance Attorneys in Florida have been busier than ever for the past few years due in large part to a controversial new statute that affects the life insurance policies taken out by couples who have since gotten divorced. Insurance companies look for reasons to avoid paying you, and to one of these companies, divorce is a great reason.
Filing for divorce can be both emotionally and financially exhausting. During and after the divorce process, it is easy to forget about that life insurance policy you took out a few years ago when your marriage seemed perfect.
Here’s what you need to know regarding your life insurance policy following a divorce:
There may be Unclear or Vague Language in Divorce Decrees
People take out life insurance policies to ensure their family will be financially protected when they die. It is common for a husband to name his wife as the beneficiary to his insurance policy and vice versa.
During the divorce proceeding, you and your spouse will want to be sure to specify whether you want to remain beneficiaries in each other's’ life insurance policies. Sometimes the language in these provisions is not clear or is not specific enough, which may enable your spouse to change his mind and name someone else as the beneficiary. Obviously, this may be cause for conflict between you and the new beneficiary, but it can also result in an insurance company’s refusal to pay out. Sometimes the parties may agree to keep the policies for the benefit of the children, so you should make sure the divorce decree provision is clear about the intention of the parties.
Know who your Beneficiary is
Many couples never update or simply forget about their life insurance policies, which can lead to problems down the line if you ended up getting a divorce.
Some spouses will opt to keep their ex as the named beneficiary to the policy for a number reasons. For example, she may believe that any extra income could help her ex provide for their kids in the event that she dies, so she keeps him on the policy. In 2012, however, the State of Florida passed a controversial statute that includes a divorce exclusion for life insurance policy beneficiaries.
Whether you intend to keep your former spouse as beneficiary or not, you should know how the new law may impact your life insurance policy.
What the New Law does
This new law makes it so that if you name your spouse as beneficiary on a life insurance policy and you decide to split up later on, your spouse will be treated as though he or she predeceased you. Section 2 of Florida Statute § 732.703 states:
“A designation made by or on behalf of the decedent providing for the payment or transfer at death of an interest in an asset to or for the benefit of the decedent’s former spouse is void as of the time the decedent’s marriage was judicially dissolved or declared invalid by court order prior to the decedent’s death, if the designation was made prior to the dissolution or court order. The decedent’s interest in the asset shall pass as if the decedent’s former spouse predeceased the decedent.”
In other words, the benefits will skip your spouse and go to contingent beneficiaries, if you named any. Without contingent beneficiaries, the policy will be made payable to your estate, and your family will have to make a claim for those benefits, which is often a time consuming and lengthy process. This could force your family to open an Estate in Probate Court, which could be a very costly, confusing and lengthy process.
Whether your decide to keep your former spouse on the policy or name someone else, you should consider updating your policy and designate that person as your beneficiary, otherwise your benefits may go directly to a contingent beneficiary or even to your estate. The law has an inherent conflict with your policy though because if you have a desire to keep a former spouse on there, then arguably you don't need to update your policy since the ex is already on there as beneficiary. It may be a good idea to contact your life insurance company and find out if there are any forms they need you to submit to reaffirm your beneficiary designation post-divorce.
It is Unclear Whether the New Law is Retroactive
The statute is said to apply retroactively, meaning that it will apply to divorced couples even if the divorce occurred prior to the law’s enactment in 2012. Issues have come up, however, regarding the constitutionality of denying benefits to those former spouses who were reinstated as beneficiaries prior to the enactment of the law.
Accepting the Exceptions
The law is unnecessarily complex, which leads to significant controversy. Within the statute eliminating former spousal rights if named beneficiary on the former spouse's policy at the time of divorce are several exceptions which could keep the former spouse on the policy. Moreover, the law allows parties to gift insurance policies under certain circumstances. There could also be post-divorce agreements between the parties which could be outside of the divorce rendering the statute inapplicable.
Florida Life Insurance Attorneys
If you need help settling a life insurance dispute, our Florida life insurance attorneys can help. At the Law Offices of Jason Turchin, we handle claims on a contingency fee basis, meaning that we only get paid if you recover money and waive all fees and costs if there is no recovery. Call us today for your free consultation at 800-337-7755.