Life Insurance After Divorce

By Sarah Knapp

Life insurance is designed to provide an added level of protection and security for your family and loved ones in the event of tragedy. Most people make the beneficiaries of such policies their spouse or their children. But what happens to those life insurance policies after a divorce?

A life insurance policy is a contract between the insurer and the policy owner, and the policy owner generally has full authority to designate whomever he or she chooses as the beneficiaries of the policy. Further, the policy owner can often terminate the policy or change the beneficiaries at any time, and many do after a separation or divorce.

However, if the insured individual has a child support or spousal support obligation, the divorcing parties may want to keep that financial security net in place. Domestic Relations Laws in Virginia allow the Court to require that such policies and beneficiary designations be maintained in some circumstances. Additionally, parties can agree to maintain certain life insurance obligations through Settlement Agreements.

Under Virginia law, the court has the authority to order a policyholder to maintain an existing life insurance policy and designate their minor children (not the former spouse) as beneficiaries of that policy as part of a child support order.

Recently, however, a new law was passed which extends that authority to cases involving spousal support. The new law, VA Code Section 20-107.1:1, will take effect on July 1, 2017, and allows the court to require the maintenance of life insurance policies (private or employer provided), as well as the beneficiaries (including the former spouse), that were in existence during the marriage in cases where there is a spousal support award.

An important caveat, especially in Northern Virginia where there are many federal employees and members of the military, is that the state courts cannot restrict beneficiary designations for life insurance policies provided pursuant to federal law. The Federal Employee Group Life Insurance (FEGLI) and Servicemen’s Group Life Insurance (SEGLI) programs are employer provided life insurance policies put into place as the result of laws enacted by Congress. The language of those laws give the federal employee and the service member the right to designate their beneficiaries and change them at any time. The Courts have determined that because federal law trumps state laws pursuant to the U.S. Constitution, state courts cannot take away or restrict that right.

The result is that that Virginia courts cannot make any orders related to FEGLI or SEGLI policies, nor can they enforce an agreement to maintain these policies included in a Settlement Agreement. So, while parties can agree that a party must name their former spouse or children as the beneficiaries of their FEGLI or SEGLI policy, a Court could never enforce that obligation if the party chooses not to honor that provision of their Settlement Agreement.

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