Is Your Life Insurance Beneficiary Up to Date?

When Minnesota couple Mark Sveen and Kaye Melin married, Mark made Kaye his life insurance policy’s primary beneficiary, and when they divorced ten years later, Mark forgot to change that.

As a result, when he passed away, Kaye was still his primary beneficiary – much to the despair of his adult children. They were so angry about the matter that they filed a lawsuit and took the case all the way to the Supreme Court.

This situation may sound extreme, but mix-ups over life insurance beneficiaries are common.

Since the last thing you want for your loved ones after you die is bickering, it’s important to keep your life insurance policy beneficiaries up to date.

It is important to name both a primary and contingent beneficiary. Your primary beneficiary will receive your life insurance policy proceeds when you die – unless he or she dies before you do, in which case your contingent beneficiary will get the money.

The main factor to consider when naming beneficiaries is who likely needs your financial support after you are gone.

When you have a spouse who is a homemaker with young children, the decision is easy. When you are divorced with adult children, it may not be. That is possibly what led Mark Sveen to leave his family in such a pickle.

So what happened? A Minnesota federal court sided with Sveen’s children because of a 2002 Minnesota state law stating that a divorce automatically invalidates the naming of a former spouse as a life insurance policy beneficiary.

But an appeals court sided with Sveen’s ex-wife, because the US Constitution’s so-called contracts clause prevents states from creating any laws that impair “the obligation of contracts.”

Now the case is with the US Supreme Court, and its decision could affect the validity of similar laws in as many as twenty-eight other states.