Supreme Court To Hear Minnesota Case Concerning Post-Divorce Life Insurance
The following article is a little bit of everything, touching on several points we’ve discussed before. The post concerns a case heading to the U.S. Supreme Court for review that originated in Minnesota. That case is about divorce, but also about estate planning (or, at least, the failure to properly plan). The case illustrates the troubles that can arise when a person fails to think sufficiently far ahead, leaving problems that loved ones must fight about for years into the future. A little bit of forethought could prevent you and your loved ones from following down the same path.
The case revolves around a marriage between Mark Sveen and Kaye Melin. The two married back in 1997, a second marriage for Mark who already had children from a previous relationship. Unsurprisingly, following the marriage Mark added Kay as the beneficiary for a number of his financial accounts, including his life insurance. The two stayed married for a decade or so and then the relationship unraveled. Though the divorce became final with relative speed, Mark failed to make any changes to his beneficiary designations.
Though this is an all too common story, Mark never had an opportunity to fix things. He passed away in 2011, before cleaning up his affairs. That means that Kaye remained listed as his sole beneficiary, something that proved very irritating to his now adult children. The children filed suit, arguing that they were entitled to the life insurance proceeds, not his former wife. A federal court in Minnesota sided with the kids, relying on a 2002 law in Minnesota that said that divorce automatically serves to nullify any designation of a former spouse as beneficiary of a life insurance policy.
The case then made its way to the Eighth Circuit Court of Appeals, which overturned the lower court’s decision. The Eight Circuit decided that the Minnesota law violates the Constitution’s contracts clause. The reasoning was that the Constitution prevents states from enacting laws which serve the purpose of impairing the obligations of contracts, in this case, life insurance policies.
Mark’s children then appealed the case to the U.S. Supreme Court, arguing that Minnesota’s law is not unconstitutional, but instead a normal means of regulating the divorce process, something within the state’s purview. The children also argue that the law does not impair any contractual obligations. As for the insurer, they are only obligated to pay proceeds. The question is to whom the money should go. This has nothing to do with the insurer’s contractual obligations and thus not a constitutional question. Instead, this is a simple attempt by the government to acknowledge reality. In most cases when couples divorce, people do not intend for their ex to remain as their beneficiary. The rule helps avoid uncertainty and unintentional windfalls.
The case is expected to be heard for oral argument by the end of the month. It’s an important one and could impact not only Minnesota’s law regarding divorce on life insurance policies, but similar laws across the country. At last count, some 28 other states have similar laws that could be affected by the Supreme Court’s decision.
Though the hope is that the Supreme Court upholds the Minnesota law, the case is a good example of why individuals should always be evaluating their estate plans, taking stock of life changes and adapting as a result. Had Mark simply made the beneficiary change immediately following the divorce, the entire legal battle before the Supreme Court could have been avoided and his children could have already had the insurance money they believe their father intended to leave them.
Minnesota Family Attorney
An experienced Minnesota family law attorney can help walk you through the difficult process of divorce, including offering advice on confusing financial issues such as alimony and helping negotiate emotional subjects like child custody arrangements. For more information on divorce in Minnesota, along with a variety of other topics, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.
Source: Argument preview: Justices consider contracts clause and post-divorce life-insurance policies, by Amy Howe, published at SCOTUSBlog.com.
