After a divorce, a former spouse is no longer the beneficiary under a life insurance policy

Hadfield v. The Prudential Insurance Co., 408 N.J. Super. 48 (App. Div. 2009), A-5140-07T1; June 16, 2009:

Picture by Joan Thewlis

Picture by Joan Thewlis

Husband named Wife as the beneficiary on his life insurance policy. Later, the parties divorced; however, the designation of beneficiary on the life insurance beneficiary was not changed. After Husband’s death, former-Wife asserted a claim to the life insurance proceeds, as the named beneficiary.

At the time Wife and Husband were married and were divorced, N.J.S.A. 3B:3-14 provided in pertinent part:
If after having executed a will the testator is divorced or his marriage annulled, the divorce or annulment revokes any dispositions or appointment of property made by the will to the former spouse . . . unless the will expressly provides otherwise.

The Legislature amended this statute, effective February 27, 2005, so that it now provides in pertinent part:
Except as provided by the express terms of a governing instrument, a court order, or a contract relating to the division of the marital estate made between the divorced individuals . . . a divorce or annulment . . . revokes any revocable . . . dispositions . . . made by a divorced individual to his former spouse in a governing instrument . . . .
. . . .
In the event of a divorce or annulment, provisions of a governing instrument are given effect as if the former spouse . . . disclaimed all provisions revoked by this section . . . .

At the same time, the Legislature amended the definition of a governing instrument contained in N.J.S.A. 3B:1-1 to include a life insurance policy. The Senate Judiciary Committee Statement explained that the amendment to N.J.S.A. 3B:3-14 would “revoke . . . non-probate transfers occurring by reason of the decedent’s death to the former spouse.” L. 2004, c. 132 (Statement by the Senate Judiciary Committee).

In the court’s judgment, In re Will of Reilly, 201 N.J. Super. 306 (App. Div. 1985), provides guidance. The Reilly case concerned a will that was executed by Bernard J. Reilly on July 9, 1976, in which he left his entire estate to his fiancée, Eileen Budnik. He married Ms. Budnik the following day, July 10, 1976. That marriage was ultimately annulled on March 23, 1978, and Reilly died some five years later, in 1983, without having changed his will. Id. at 308-09.

N.J.S.A. 3B:3-14, originally affecting only wills, came into effect in 1982, but another provision within the probate statutes stated that N.J.S.A. 3B in its entirety applied to testator deaths occurring after September 1, 1978. Reilly, supra, 201 N.J. Super. at 311. Thus, a similar situation to this case was presented: a will naming a former spouse as a beneficiary remained unchanged after an annulment; the annulment occurred before the statute’s effective date and the testator’s death occurred after the effective date.

The former spouse in Reilly, seeking to take under her annulled ex-husband’s will, argued that N.J.S.A. 3B:3-14 did not apply because the marriage was annulled before the effective date of that statute. Reilly, supra, 201 N.J. Super. at 309. This court ruled that N.J.S.A. 3B:3-14 applied despite the fact that the annulment predated the effective date of the statute. This court held that Reilly’s will in favor of Budnik had been revoked by operation of law. Reilly, supra, 201 N.J. Super. at 312.

Other jurisdictions have also ruled in this manner. The court in Reilly cited to the Virginia Supreme Court, which held that Virginia’s revocation statute applied to divorces that occurred before the effective date of the revocation statute where the death occurred after the effective date. Papen v. Papen, 224 S.E.2d 153, 155 (Va. 1976). The Papen court noted that this application did not present a problem of retroactivity, since wills are ambulatory and thus do not afford a vested right to a party named. Ibid. That same logic applies to this case as well; defendant had no vested right in the life insurance policy since Ryan could have validly changed his beneficiary at any time prior to his death.

The New Hampshire Supreme Court in In re Estate of Sharek, 930 A.2d 388 (N.H. 2007), also applied a revocation statute in an analogous situation. In that case, Robert Sharek married Georgette Sharek on July 1, 1963. He executed a will on August 24, 1982, naming her as beneficiary. They divorced on April 20, 1983. He died on August 12, 2005, without having executed a new will. New Hampshire’s statute, enacted in 1998, is substantially similar to New Jersey’s. Relying in part on Reilly, supra, the New Hampshire Supreme Court ruled that his will had been revoked by operation of law. Sharek, supra, 930 A.2d at 391-92.

The court recognize that not all courts have come to a similar conclusion. The Nevada Supreme Court, also dealing with the same issue, held that the statute could not be applied to wills where the divorce occurred before the statute’s effective date even though the death occurred after that date. De Mars v. Slama, 540 P.2d 119, 120 (Nev. 1975).

The court expressed the opinion that the better reasoned approach is that utilized in Reilly, supra, Papen, supra, and Sharek, supra. Likewise, the court held that that same logic also applies to the present case, where the issue concerns a life insurance policy rather than a will.

Just as with a will, this life insurance policy allowed Husband to change the beneficiary at any time, and thus Wife, contrary to her argument, did not have a vested right to the policy proceeds. Because she has no vested right, it is not an improper retroactive application of that statute for the court to hold that the amended N.J.S.A. 3B:3-14 applies to this life insurance policy.

See my related Blog Post: Validity of a Power of Attorney and Health Care Advance Directive following a divorce.


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