Attorney Katherine Kraus

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Many divorcing parties might find this Supreme Court case relevant

On Behalf of | Jun 22, 2018 | Divorce

Judicial ping-pong was certainly not envisioned by either an ex-wife or the adult children of a man from a former marriage who died leaving a life insurance policy. Both the former spouse and the kids voiced a clear-cut claim to the proceeds, expecting to win based on bedrock notions of American law.

Of course, only one side prevailed, with the outcome becoming clear only after successive rounds of litigation that weaved through every level of the federal judiciary. We summarize the case details here for our Arizona readers, given the firm precedential value in the U.S. Supreme Court’s recently issued ruling.

From the former spouse’s view, the case was simple enough, to wit: Her ex-husband never removed her as primary beneficiary of his life insurance policy. Thus, she confidently made a claim to the proceeds following his death.

His adult kids from a previous marriage did too, though, being equally confident of their position in light of a state law passed while their dad was alive and still married to the ex-spouse. That legislation provided that beneficiary designations to former partners automatically expired upon divorce.

So, which side won?

Ultimately, the children claimed the money, with the nation’s highest court ruling earlier this month that state law retroactively affecting a beneficiary designation does not unlawfully impinge on contractual rights guaranteed under the U.S. Constitution. In a near-unanimous decision, SCOTUS justices noted that the law before them did not impermissibly interfere with any contractual prerogative. It was a mere “default rule, which [a] policyholder can undo in a moment” by simply making a new designation.

The court’s ruling reversed an intermediate appellate panel’s decision that the statutory enactment did unlawfully interfere with contractual rights.

One clear takeaway for some divorcing individuals is that they might want to timely review and take necessary action concerning contracts that could come under a spotlight during the dissolution process.

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