by seeshel38 » Tue Jun 12, 2012 11:02 pm
I live in MI. My ex husband and I purchased a life ins. policy some years ago. Since I was the younger of the us it was placed in my name as the owner with him as a rider alonger with the children. I kept the policy and cont to pay on it. He has now passed away. I have submitted the paperwork to the claim department. Now they are requesting the divorce papers along with the settlement. What does this mean. Because we've been divorced, but I own the policy can they refuse to pay
Posted: Wed Jun 13, 2012 08:32 am Post Subject:
No, they can't refuse to pay just because you two were divorced. Certain life insurance companies have different claim procedures, so I'm sure it's just part of their process. I wouldn't worry about it.
Posted: Wed Jun 13, 2012 06:49 pm Post Subject:
No, they can't refuse to pay just because you two were divorced. Certain life insurance companies have different claim procedures, so I'm sure it's just part of their process. I wouldn't worry about it.
Actually, certain states DO have laws that state that once a divorce has been finalized, any personal/group life insurance beneficiary designations are null and void. California is one example of this.
InsTeacher 8)
Posted: Wed Jun 13, 2012 07:01 pm Post Subject:
Actually, certain states DO have laws that state that once a divorce has been finalized, any personal/group life insurance beneficiary designations are null and void. California is one example of this.
I've never heard of that before, but I'll take your word for it. I guess I learn something new everyday. I tried to quickly Google MI law with divorce and life insurance, but nothing jumped out at me.
Posted: Thu Jun 14, 2012 04:01 pm Post Subject:
Actually, certain states DO have laws that state that once a divorce has been finalized, any personal/group life insurance beneficiary designations are null and void. California is one example of this.
There are now about 20 or 22 states that have changed their PROBATE LAWS to revoke the beneficiary status of divorced persons in life insurance and retirement plans (those not covered by ERISA, which are preempted under federal law). California was somewhat late to the game, having enacted its changes in 2001 or 2002. Some states have had these laws on their books since the 1980s.
The laws do not prohibit the policyowner from renaming the now ex-spouse as the new beneficiary immediately following the divorce, nor do they apply when the divorce order specifically requires the former spouse to be maintained as the beneficiary.
The most adept divorce attorneys, however, will demand that ownership of the policy be transferred to the ex-spouse, which allows that person to name anyone or anything as the new beneficiary, as well as to ensure that the policy stays in force.
I tried to quickly Google MI law with divorce and life insurance, but nothing jumped out at me.
Then you did not "google" correctly. MCL 700.2801 and MCL 700.2807 address the matter, and automatically revoke the beneficiary status of divorced persons, if not otherwise covered in the marriage dissolution order.
Posted: Thu Jun 14, 2012 04:50 pm Post Subject:
Max,
Probate laws have no impact on this. Probate laws only come into play when the owner dies.
In this case, the owner is still alive. The policy is not probatable and is not part of the insured's estate.
Posted: Thu Jun 14, 2012 06:07 pm Post Subject:
Max, don't try to be a know it all. You're not the insurance God of these forums, even though you might think you are.
Posted: Fri Jun 15, 2012 02:49 am Post Subject:
Probate laws have no impact on this. Probate laws only come into play when the owner dies.
Now you're showing your lack of knowledge about probate laws. The Insurance Code is not the only place that deals with insurance issues, and the Probate Code is not only concerned with dead persons.
There is no way to say this more clearly: You are wrong. While life insurance proceeds are considered a "non-probate" asset -- specifically to allow those monies to bypass the property rights of married persons and their heirs -- in those states which have enacted legislation to revoke the beneficiary status of an ex-spouse, you'll usually find that legislation in the state's Probate Code (or in the section of their state laws dealing with probate or estates in general).
It has nothing to do with someone dying in this case, it's about revoking the property rights of married persons as established in probate law from those same persons following their divorce.
Do the research and find out for yourself. I've already posted the MI code sections, you can look at those for starters (the chapter of MI law is entitled: ESTATES AND PROTECTED INDIVIDUALS CODE -- that's close enough). But if you want to find the similar section of law in California, you'll have to look in the Probate Code. I'll give you a head start: http://www.leginfo.ca.gov/calaw.html
Posted: Fri Jun 15, 2012 09:28 am Post Subject:
Max,
Please stick with me as I fight to understand this issue more clearly.
It has nothing to do with someone dying in this case, it's about revoking the property rights of married persons as established in probate law from those same persons following their divorce.
Jim and Gloria get divorced.
Ex. 1 Jim is the owner of a policy on his own life. Gloria is the beneficiary.
The policy belongs to Jim. Gloria gets stripped as beneficiary.
Ex. 2 Same as above, but Gloria is the owner of the policy.
The policy belongs to Gloria. How can a probate code strip her of her rights to an asset that she owns???
I'm willing to bet that you can't find a single court case in which the owner got stripped of their rights.
By the way, stripping the beneficiary of the policy would mean that there is no listed beneficiary. With most policies in most states, if there is no living named beneficiary at time of death, the default beneficiary is the policy owner if alive. Therefore, if Gloria did get removed as beneficiary in ex. 2, she would still be beneficiary because stripping the named beneficiary causes the owner, Gloria, to become beneficiary.
Posted: Fri Jun 15, 2012 02:55 pm Post Subject:
Jim and Gloria get divorced.
Ex. 1 Jim is the owner of a policy on his own life. Gloria is the beneficiary.
The policy belongs to Jim. Gloria gets stripped as beneficiary.
Ex. 2 Same as above, but Gloria is the owner of the policy.
The policy belongs to Gloria. How can a probate code strip her of her rights to an asset that she owns???
Your examples are coherent, but isn't "Jim" having his right as owner stripped, too, if he and Gloria are parting as friends and had no intention of removing her as his beneficiary? He absolutely is.
The law makes a presumption in a different direction, and it affects both of your examples. But, in both cases, the owner has the ability to rename a new beneficiary, and it may be the same person. They just need to reaffirm their desire to prevent any disputes.
We're not on opposite sides concerning the outcome of this issue. That's not the disagreement here. In fact, the OP posted the same thread separately and in my response to her there, I said I believed that, although her situation was complicated, she was probably entitled to the proceeds for the very reason you point out -- she is the owner of the policy.
The whole disagreement was sparked by your errant comment that "probate laws have no impact", when that is entirely incorrect. To make matters worse, the law in Michigan is written with very vague (overly broad) language that only mentions "governing instrument" -- which could be a life insurance policy or title to an exclusive golf club membership. For that, you have to give credit to the idiots in the state legislature who create more problems than they solve when they write vague law.
I doubt you've had the inclination or taken the time to look at it, so here's the full text of MCL 700.2807:
700.2807 Revocation upon divorce; revocation by other changes of circumstances.
Sec. 2807.
(1) Except as provided by the express terms of a governing instrument, court order, or contract relating to the division of the marital estate made between the divorced individuals before or after the marriage, divorce, or annulment, the divorce or annulment of a marriage does all of the following:
(a) Revokes all of the following that are revocable:
(i) A disposition or appointment of property made by a divorced individual to his or her former spouse in a governing instrument and a disposition or appointment created by law or in a governing instrument to a relative of the divorced individual's former spouse.
(ii) A provision in a governing instrument conferring a general or nongeneral power of appointment on the divorced individual's former spouse or on a relative of the divorced individual's former spouse.
(iii) A nomination in a governing instrument, nominating a divorced individual's former spouse or a relative of the divorced individual's former spouse to serve in a fiduciary or representative capacity, including, but not limited to, a personal representative, executor, trustee, conservator, agent, or guardian.
(b) Severs the interests of the former spouses in property held by them at the time of the divorce or annulment as joint tenants with the right of survivorship, transforming the interests of the former spouses into tenancies in common.
(2) A severance under subsection (1)(b) does not affect a third-party interest in property acquired for value and in good faith reliance on an apparent title by survivorship in the survivor of the former spouses unless a writing declaring the severance has been noted, registered, filed, or recorded in records appropriate to the kind and location of the property that are relied upon, in the ordinary course of transactions involving that type of property, as evidence of ownership.
(3) Each provision of a governing instrument is given effect as if the former spouse and relatives of the former spouse disclaimed all provisions revoked by this section or, in the case of a revoked nomination in a fiduciary or representative capacity, as if the former spouse and relatives of the former spouse died immediately before the divorce or annulment.
(4) Each provision revoked solely by this section is revived by the divorced individual's remarriage to the former spouse or by a nullification of the divorce or annulment.
(5) No change of circumstances other than as described in this section and in sections 2803 to 2805, 2808, and 2809 causes a revocation.
It doesn't mention life insurance, it doesn't mention beneficiary. It says "governing instrument" and "to serve in a fiduciary or representative capacity, including, but not limited to . . . ." Like most other similar probate laws, it is misogynistic at its core -- it is intended to revoke the woman's share in most cases. But we have a twist in this instance.
As I see it, the whole mess confronting the OP is the result of the divorce attorneys' failure to understand the importance of dealing with or resolving the life insurance issue within the divorce.
And the real complicating piece of this law is the language of this one subsection:
(b) Severs the interests of the former spouses in property held by them at the time of the divorce or annulment as joint tenants with the right of survivorship, transforming the interests of the former spouses into tenancies in common.
And here's why. Let's alter the situation slightly and see if it doesn't make more sense. The OP's husband owns the policy and the OP is the additional insured. After the divorce, because the attorneys leave the matter unresolved, the husband calls the insurance company and says, "Cancel the coverage on my wife." The insurance company has no idea a divorce has occurred. As the owner, he's entitled to do that. He doesn't have to worry about the ex-wife as beneficiary of his death benefit, the law has taken care of that, so he doesn't do anything to change that.
I have never seen an insurance company that would not allow the already-approved-for-life-insurance wife to retain her coverage in an individual policy. All she has to do is contact the insurance company, make an application perhaps, and pay the premiums (and, yes, we're probably talking about the difference between a term rider and a more costly cash value alternative -- but that's beside the point).
Effectively, this sets up a de facto form of joint tenancy in the original policy even though only the husband is the owner of the policy. That's essentially the situation the OP now finds herself in (she just never terminated the husband's coverage).
The MI law changes that position to "tenants in common" which preserves each tenant's portion of assets for their own heirs, segregating it from the other tenant's asset column. It also prevents the asset from being "hypothecated" -- the legal term (hidden by artificial means) -- so that the joint owner loses the asset unwillingly.
With divorce order in hand, the now ex-husband probably could have gone to the same insurance company and obtained a new policy on himself for the same coverage amount and issue age without having to go through underwriting. Once-approved, always-approved, right? (As long as coverage does not have to be reinstated.)
That could be the theory behind a challenge to the OP's entitlement to the proceeds. I don't believe it would hold water, but when the law is vague, some judge has to step in and do the legislature's job for them, and then come the appeals.
The OP continued the husband's coverage, paid the premiums, but failed to simply rename herself as beneficiary following the divorce to maintain compliance with MI law, which would have eliminated all possibility of a challenge to her entitlement. If the court were to find that the heirs are entitled to the death benefit, the OP would, at least, be entitled to recovery of the premiums she paid, since she had no duty to pay them if she were not going to benefit from them.
But, like you, I don't believe her entitlement should -- or will -- be disrupted, but there's no telling what could happen in a courtroom. Vague law leads to bad judgments, and sometimes to worse appellate decisions.
As fate would have it, and although the circumstances are not quite the same, in my email this morning came a link to a new appellate decision involving a New Hampshire Supreme Court case and a life insurance policy in a divorce case in which the wife was removed as beneficiary by the husband in favor of his children -- in the face of an "anti-hypothecation" order during the litigation. If you're interested in reading it, here's the link: http://statecasefiles.justia.com/documents/new-hampshire/supreme-court/2011-454.pdf?ts=1339589369
Posted: Fri Jun 15, 2012 03:13 pm Post Subject:
the default beneficiary is the policy owner if alive.
andIf Gloria did get removed as beneficiary in ex. 2, she would still be beneficiary because stripping the named beneficiary causes the owner, Gloria, to become beneficiary
Or it could be her estate if she were not alive.
But we've been over this issue, too. Ownership of a life insurance policy is a matter of contract law. If the owner dies prior to the death of the insured, the contract will discuss who the new owner will be, and that could be the insured, as it is in some policies. Otherwise, it is a matter of probate law in terms of property ownership. And if the insured was once married but is now divorced, probate law could remove his/her ex-spouse as a successor beneficiary. Owner-beneficiary is the complication here. MI law is not very specific about it as it relates to this "governing instrument".
And the only thing the "what ifs" do is confuse the issue.
Add your comment