You may be wondering what the awarding of life insurance proceeds has to do with family law. In most cases, this would be an issue for the probate courts, but it's not that simple when the right to a portion of someone's estate is spelled out in a divorce agreement. In January of this year, the United State Court of Appeals upheld the decision of the United States District Court in the case of Sun Life Assurance Co. v. Jackson. The case involved a couple who were married in 1993 and had a daughter in 1995. They divorced in 2006 with an agreement that included the following provision:
“In order to secure the obligation of the parties to support their child during her minority, Father and Mother shall maintain, unencumbered, all employer provided life insurance, now in existence at a reasonable cost, or later acquired at a reasonable cost, naming their minor child as primary beneficiary during her minority; and the obligation to do so shall continue until she . . . reach(es) the age of eighteen (18) or graduates from high school, whichever occurs last...”
At the time of the agreement, the father's beneficiary on his policy was his brother. The father died in 2013, which was tragic enough for his daughter. To make matters worse, he never changed the beneficiary designation, resulting in the insurance company refusing to recognize her as the beneficiary, in spite of the divorce agreement. They went ahead and paid out the proceeds to the brother, and sought a declaratory judgment from the court stating that the funds were properly disbursed The daughter filed a counterclaim, stating that the company should have disbursed the funds to her, as she is the legal owner per the divorce agreement.
The Court of Appeals found that “the divorce decree suffices as a qualified domestic relations order that ‘clearly specifies' [daughter] as the beneficiary under the Employee Retirement Income Security Act....” Their decision was based on the fact that QDRO clearly specified the recipient's name and last known mailing address, and the amount or percentage to be paid out to her. Furthermore, it stated the number of payments or duration of payments (such as until the age of 18 or graduation from high school). In addition, the court pointed out that the parents' divorce agreement clearly spelled out “all employer provided life insurance” of both parents. While the ruling is clear and just, it's a shame that grieving parties had to enter into prolonged litigation. It's not as easy to blame the father, however, since we're not sure what was going on in his life between 2006 and 2013, the year of his death. One light of hope for the daughter, however, was the specific, indisputable language in the QDRO, which was very likely drafted by an experienced attorney. For more information on life insurance designations as a result of divorce, please speak with the attorneys of Villani & DeLuca, P.C.