The Importance of Keeping Beneficiaries Updated

The importance of updating your beneficiary designations, specifically for policies which fall under Federal Employees’ Group Life Insurance (“FEGLI”)  for life insurance policies has just been highlighted by the Supreme Court’s 9-0 decision in Hillman v. Maretta.  During the marriage of Mr. Hillman and Ms. Maretta, Mr. Hillman named Ms. Maretta as the beneficiary of his FEGLI policy.  They later divorced and Mr. Hillman remarried but failed to change the beneficiary of his FEGLI policy.  At the time of Mr. Hillman’s death, Ms. Maretta was still named as the beneficiary and received the benefits for the FEGLI plan, an amount in excess of $120,000.00.  The current Mrs. Hillman brought an action to claim the benefits under Virginia law, which states that divorced spouses cease to be the designated beneficiaries of each other’s life insurance policies.  Instead, the statute appropriately directs that decedent’s widow or widower at the time of death, or if none, descendants, become entitled to the benefits.  Unfortunately for the widow Hillman, the Federal statute provides that the benefits follow in the order of precedence, with the designated beneficiary as the first person in line to receive the proceeds of the policy upon the employee’s death.  The Federal law preempts the state law and the benefits go to the ex-wife. No matter if it is a divorce, death or simply a change of mind or heart, it is important to know whom you have designated as the beneficiary of not only life insurance policies but IRA accounts, 401(k) accounts, 403(b) accounts, defined benefit plans, defined contribution plans and any other accounts you may possess.  An estate planning attorney will review these designations with you to ensure they are as you desire and not in conflict with your estate planning documents and your desires.