November 01, 2013 Tort Trial and Insurance Practice

Life Insurance Benefits after Divorce

In a situation where a deceased’s widow and ex-spouse both claim entitlement to life insurance provided pursuant to an employee welfare benefit plan governed by the Employee Retirement Income Security Act (ERISA), a qualified domestic relations order (QDRO) is the key to determining the rightful beneficiary.

For example, Husband divorces Wife, and their divorce decree states that Husband’s life insurance coverage from the group policy provided by his employer shall be maintained for “Wife.” Husband marries Second Wife and changes the beneficiary form to name “Second Wife” as the beneficiary of his life insurance. Husband dies, and Wife and Second Wife claim to be the appropriate beneficiary. If the divorce decree is a QDRO, Wife will receive the benefit; if the decree is not a QDRO, Second Wife will receive the benefit.

DRO vs. QDRO. A domestic relations order (DRO) is defined as “any judgment, decree, or order (including approval of a property settlement agreement) which (I) relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and (II) is made pursuant to a State domestic relations law.” 29 U.S.C. 1056(d)(3)(B)(ii). A state authority, generally a court, must issue a judgment, order, or decree to formally approve a property settlement agreement before it can be a DRO under ERISA. A property settlement simply agreed to and signed by the parties is not a DRO.

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