Recently the Court of Appeals was asked by a surviving ex-wife to award life insurance proceeds to herself and children, which her ex-husband, before he died, elected go to his fiancé instead.
When husband and wife were divorced, husband agreed to have life insurance in place to cover his maintenance and child support obligations.
After husband died and the fiancé was awarded the life insurance proceeds, the probate court decided that fiancé should keep the proceeds. Since it wasn’t her fault that husband failed to honor the terms of the divorce.
The Court of Appeals agreed with wife, and reversed the probate court.
LIFE INSURANCE COVERAGE AS A CONDITION OF DIVORCE
Many divorce decrees with child support or spousal maintenance obligations require that in order to secure the obligation, the responsible party must maintain a life insurance policy for the benefit of the surviving children or former spouse.
In this recent case, the husband was ordered to maintain life insurance for his children and ex-wife, as long as he had a duty to pay support. Husband did maintain life insurance, but selected his fiancé, not his ex-wife and children, as beneficiaries. Husband died, and his fiancé received the life insurance proceeds. Fiance had a legal claim to the proceeds, but, wife argued that this would violate the terms of the divorce decree.
In order to address this question, the Court of Appeals looked to previous cases, like Head v. Metropolitan Life Ins. Co., 449 N.W.2d 449 (Minn. Ct. App. 1989) and Thiebault v. Thiebault, 421 N.W.2d 747 (Minn. Ct. App. 1988) and concluded that a judgment and decree ultimately controls the beneficiary designation regardless of whether a new third-party beneficiary is designated.
The Court went to explain that even though there was no equitable legal explanation (since the fiance, though not at fault, would be forced out of a claim to which she was lawfully entitled) Thiebault points out that the law allows for a constructive trust to provide for the future financial security in circumstances where a court order stipulates one beneficiary and the obligor violates that order by assigning a different one.
An obligor’s violation of a court-ordered obligation is enough to impose a constructive trust to claw back proceeds when the court-ordered beneficiary does not receive the amount or policy they are entitled to.
In its ruling, the Court left no doubt that a life insurance provision in a divorce decree, when left to secure a maintenance or support obligation should be taken seriously.
The lesson from this recent is that when negotiating terms of a divorce, using unambiguous terms to define a party’s obligation to carry life insurance, is essential to ensuring that the obligation is fulfilled.
Contact Beyer & Simonson
If you are facing divorce and any of the divorce-related issues such as spousal maintenance, child support, child custody, property division, or domestic abuse matters, you need our experienced Minneapolis divorce attorneys to help you. Contact Beyer & Simonson in Edina, Minnesota today at (952) 303-6007.