Life Insurance Beneficiaries Must Be Designated, Not Assumed

In July 2012, Michael G. Fox got married, and looked forward to many happy years with his new wife, Evanisa.  Unfortunately, Michael died tragically in a work-related car accident just four months later.  Evanisa assumed that she was entitled to the death benefit from his life insurance policy.

In attempting to file her claim, Evanisa discovered that Michael’s sister, Mary Ellen Scarpone, was named as the beneficiary of the policy back in 1996.  Allegedly, Michael had expressed that he intended to change the beneficiary to his new wife.  Yet he never did so.  As a result, two competing claims were filed by Michael’s wife and sister.

The sister won!  In Fox v. Lincoln Financial Group, the Appellate Divison of the New Jersey Superior Court rejected Evanisa’s argument that there should be a bright line rule which automatically would entitle a spouse to pre-exisitng life insurance.  It further held that the fact of marriage coupled only by a verbal expression of a decedent to change his beneficiary is ineffective to defeat the existing beneficiary status.

This case is significant for two reasons.  First, although no action needs to be taken to remove a spouse as a beneficiary of insurance after divorce, an affirmative writing needs to be made in order to make a spouse a beneficiary of pre-exisitng insuarnce after marriage.   Second, there should be no assumptions about the rights of a spouse after marriage.   There are various statutes and caselaw which provide rights such as the elective share.  However, that is no way to plan.  To avoid any legal or personal angst for one’s survivors, estate plans should automatically be evaluated when entering into marriage.