Supreme Court Favors Ex-Wife Over Widow In Battle For Life Insurance Proceeds

Forbes reports on a now infamous case in legal circles:

When Warren Hillman died in 2008 at the age of 66, his assets included a life insurance policy worth $124,558.03. For the past five years his ex-wife and his widow have been fighting over that money. Today the U.S. Supreme Court found that Judy Maretta, who Hillman divorced 10 years before he died, was entitled to every penny of it.

All this because Hillman made a basic and unfortunately all too common estate-planning mistake: when he divorced Maretta he did not change the beneficiary designation for a life insurance policy.

Possibly the most powerful yet often-overlooked aspect of an estate plan is beneficiary designations. Beneficiary designations trump any instructions found in your last will. Beneficiary designations are also called Payment-on-Death (P.O.D.) or Transfer-on-Death designations (T.O.D.) These beneficiary designations are often found on life insurance policies but also brokerage accounts, savings & checking accounts, and certificates of deposit.

Forgetting to coordinate these nonprobate assets, as they are called, with the rest of your estate plan can completely thwart your objectives, as it may have done for Hillman.

They are called non-probate, because they operate outside of the control of the probate court and the terms of the last will.

This principle was reiterated in a recent case in Texas where the Texas appellate Court Held That Retirement Benefits Belonged To The Worker’s Sister, Who Was Designated Beneficiary, And Not The Wife:

“Property passing at death pursuant to the terms of a contract, such as contributory retirement plans, are non-probate assets that are not subject to disposition by will or by the rules of intestate succession.” Id. (citing Valdez v. Ramirez, 574 S.W.2d 748, 750 (Tex. 1978)). The court held that the disposition of these assets is controlled by lifetime transfer rules. Id. While being earned by the employee spouse, the right to the benefits under the retirement plan is subject to the employee spouse’s sole management, control, and disposition. This includes the right to designate how the benefits will be paid, whether at retirement or in the event of the employee spouse’s death. “By statute, a TRS plan member may “designate one or more beneficiaries to receive benefits payable by [TRS] on the death of the member” and file it with TRS.” Id. (citing Tex. Gov’t Code Ann. § 824.101(a)).

This is the law in Alabama as well. The Alabama Court of Civil Appeals declared in Walden v. Walden, 686 So. 2d 345:

Further, we conclude that the dissolution of the marriage had no legal effect upon the designation of the wife as the beneficiary under the husband’s IRA. Our legislature has enacted a statute that provides that a divorce revokes any provisions, or appointments of property, to a spouse pursuant to a will executed before a divorce. See, § 43-8-137, Ala. Code 1975. Alabama has no such statute governing the nonprobate transfers of multi-party accounts such as life insurance policies or retirement and pension plans. However, the law is clear in Alabama regarding life insurance policies: where the insured fails to exercise his right to change the beneficiary, and absent a clause in the policy that conditions the rights of a beneficiary-spouse on the continuance of the marriage, the right of the beneficiary to receive proceeds pursuant to the policy is not affected by a divorce.


1. Frequently check your beneficiary designations to confirm they accurately reflect your current preferences.

2. Confer with an attorney to make sure that your beneficiary designation coordinate with the rest of your estate plan. Sometimes you may want to funnel the proceeds from the policy or account into probate and through the last will. This can be done by naming your estate as the beneficiary.

3. Make sure you have successor beneficiary nominations. Don’t rest with your spouse; name the persons you would want to receive the proceeds if your spouse died or had become disabled.

4. DON’T STOP THERE THOUGH. You need to change your Last Will and Powers of Attorney, especially if you remarry. Thankfully in Alabama, we have a statute which partially protects this situation in case of divorce, as referenced in Waldon.

If after executing a will the testator is divorced or his marriage annulled, the divorce or annulment revokes any disposition or appointment of property made by the will to the former spouse, any provision conferring a general or special power of appointment on the former spouse, and any nomination of the former spouse as executor, trustee, or guardian, unless the will expressly provides otherwise. Property prevented from passing to a former spouse because of revocation by divorce or annulment passes as if the former spouse failed to survive the decedent, and other provisions conferring some power or office on the former spouse are interpreted as if the spouse failed to survive the decedent. If provisions are revoked solely by this section, they are revived by testator’s remarriage to the former spouse. For purposes of this section, divorce or annulment means any divorce or annulment which would exclude the spouse as a surviving spouse within the meaning of section 43-8-252(b). A decree of separation which does not terminate the status of husband and wife is not a divorce for purposes of this section. No change of circumstances other than as described in this section revokes a will.

Therefore, if your ex- is named in the Last Will as beneficiary or executor, they are treated as if they died first. But again, this only applies to the Last Will.