In 1996, Warren Hillman designated his then-wife, Ms. Maretta, as the beneficiary of his federal group plan life insurance. When the couple divorced two years later, neither the divorce decree nor the associated property settlement agreement required Warren to maintain Ms. Maretta as his life insurance beneficiary. Despite having no legal obligation to keep his ex-wife as the beneficiary, Warren neglected to change his life insurance beneficiary designation.
In 2002, Warren remarried. In 2008, he died and Mrs. Hillman, Warren’s widow, filed claims for life insurance benefits. However, in accordance with the 1996 beneficiary designation, life insurance benefits were paid to his ex-wife, Ms. Maretta.
In 2009, Mrs. Hillman sued Ms. Maretta for the amount of life insurance paid out to her. Ms. Maretta, however, argued that according to federal law, she could not be held personally liable – even if it was an oversight on her ex-husband’s part. The Supreme Court of Virginia agreed and held that federal law preempts Virginia Code.
Ms. Hillman appealed to the U.S. Supreme Court, which will now hear the case sometime this spring.
This case underscores the importance of keeping your estate plan (including all beneficiary designations) current. As you can see, one small oversight can be catastrophic.