Presumption of Beneficiary Designation Revocation by Divorce

When a couple gets divorced, the division of each and every asset they own must be specified in the divorce decree. Equally as important, the former spouses must update their estate plans after their divorce is finalized, including all beneficiary designations, consistent with the divorce decree. Frequently, however, this does not happen, and the family of a divorced individual who has passed away often finds a former spouse designated as beneficiary on a retirement account or life insurance policy.

In Utah, "[e]xcept as provided by the express terms of a governing instrument, a court order, or a contract [such as a prenuptial agreement], the divorce... revokes any revocable... disposition or appointment of property made by a divorced individual to the individual's former spouse in a governing instrument..." A "governing instrument" in this context includes a beneficiary designation, meaning that if an individual names their spouse as a beneficiary of a retirement account or life insurance policy, then gets divorced without updating the designation, and then passes away, the beneficiary designation is deemed to have been revoked by the divorce, barring a contrary provision in a contract or court order.

The Utah Supreme Court has interpreted this section as creating "a rebuttable presumption that a beneficiary designation... is revoked upon divorce. The presumption can be rebutted by express terms in the life insurance policy; a court order, including a decree of divorce; or a 'contract relating to the division of the marital estate made between the divorced individuals.'" Hertzske v. Snyder, 390 P.3d 307, 311 (2017).

A third-party payor, such as a life insurance company, "is liable for a payment made or other action taken after the payor... received written notice of a claimed forfeiture or revocation..." Such notice must be "mailed to the payor's or other third party's main office or home by registered or certified mail, return receipt requested, or served upon the payor." While these provisions may be overruled by federal law or a benefits plan, they are designed to ensure that a divorced spouse's probable intent in removing their ex-spouse from a beneficiary designation after a divorce is enforced even if the beneficiary designation was not actually changed. 

Posted in: Estate Planning,Probate