Losing your spouse
or significant other can become an even more painful life event if you discover that you are not named as the beneficiary on their life insurance policy.
Naturally, the passing of someone near and dear to your heart may not initially strike up thoughts of money. However, if you were dependent on the departed's income in order to pay your bills and maintain your lifestyle, your attention will undoubtedly turn to the life insurance policy rather quickly.
Unfortunately, all too often, policy holders fail to update their beneficiary information after a significant change in life circumstances. This mistake can lead to great complications
for those left behind, and is an error that can very easily be avoided.
A famous example of a life insurance mishap began almost a decade ago when Warren Hillman passed away unexpectedly. Although he had been married to his current wife for six years, his life insurance beneficiary information
did not reflect that fact.
Having never updated his beneficiary form when he re-married, Hillman's ex
-wife was still listed as his beneficiary. Hillman hailed from Virginia, which, like New Jersey, is not
a community property state. As such, his widow had little claim to the life insurance policy since she wasn't named as beneficiary.
If you do live in a community property state
, you and your spouse are considered to be equal owners of any and all income that both
of you earn during the time of your marriage. Additionally, when your joint income is used to purchase something - you both automatically become joint owners of what was purchased - including life insurance policies. Even if your beneficiary forms aren't up-to-date, your current spouse is entitled to receive life insurance benefits under community property law.
For spouses who live in non
-community property states like New Jersey, life insurance beneficiary laws can be a little bit sticky, as Warren Hillman's case exemplified. Even though his ex-wife remained listed on his life insurance policy, New Jersey law statute N.J.S.A. 3B-3:14 specifically states that a Final Judgement of Divorce
between two parties shall automatically revoke either party's right to receive the other's life insurance benefits, even if they are named beneficiary when the other party dies.
This statute was put into place in NJ and other non-community property states precisely because of ex-spouses who forgot to update their paperwork after their divorce
. Unless specifically stated in the couple's Property Settlement Agreement, ex-spouses would no longer be entitled to each other's life insurance benefits according to N.J.S.A. 3B-3:14.
However, in the case of Warren Hillman and many like him, his life insurance policy was initiated while he worked for the federal government. The Federal Employees' Group Life Insurance Act goes against what is set out in any state laws like N.J.S.A. 3B-3:14 and states that the person listed as beneficiary
at the time of death shall receive the life insurance benefits. Because of the 'Supremacy Clause,' federal laws always supersede state laws if there is a contradiction.
In the case of Warren Hillman's widow, she did not
receive any life insurance benefits. The Supreme Court ruled in favor of the ex-wife who was listed as the beneficiary.
Do you have up-to-date Estate Planning paperwork? Making the appropriate designations is crucial if you have had changes in your life that warrant doing so. If you need help making the necessary changes or if you want to prepare your first estate plan (will) - contact our New Jersey law office
today. Consultations are free
, and our results are priceless.