Earlier this month, a U.S. Supreme Court ruling demonstrated the importance of including beneficiary designations as a vital part of estate planning. The case involved a dispute between a current and former spouse over the proceeds of a deceased federal employee’s FEGLIA (Federal Employee’s Group Life Insurance Act of 1954).
The issue in the case was whether state law, in this case Virginia, or the federal statute should take precedence when they produce different outcomes as to which spouse receives the proceeds of a FEGLIA policy.
The federal employee in the case apparently purchased the policy with is ex spouse, naming her as beneficiary. They later divorced and he remarried, but he never took time to change his FEGLIA beneficiary to his new wife. When he died, his ex-wife claimed the benefits and was paid the proceeds. The current spouse filed suit in state court, citing Virginia state law in support of her right to receiving the money.
The bottom line in the case is that the former spouse was deemed the rightful beneficiary of the FEGLIA policy. But it took a heck of a lot of litigation to determine that.
It is important for anybody engaging in estate planning to ensure they have their beneficiary designations correct. This should be a regular part of setting up and updating estate plans. A lot of money can be involved in assets with beneficiary designations, and it would be remiss for any estate planning attorney to overlook this step, particularly for those who are divorced or remarried.
Source: FedSmith.com, “Supreme Court Sides with Ex-Spouse in FEGLI Benefits Case,” Susan McGuire Smith, June 3, 2013.