It happens all the time: someone gets divorced but does not think to change the beneficiary of their life insurance and other benefits.
Louisiana has some specific laws governing what happens when someone divorces but still has the ex listed as their beneficiary on their insurance forms. Did they just forget to take the ex off? Does anyone really think that someone would leave the ex as their beneficiary rather than their current spouse, child, or other relative?
A recent U.S. Supreme Court decision (Hillman v. Maretta) muddies the waters quite a bit. The decision held that a decedent’s ex-spouse, who was still named as his beneficiary, was entitled to receive his federal life insurance benefits. The unanimous decision came despite the fact that state law provided that a divorce removes an ex-spouse as the beneficiary of a decedent’s death benefits. Although the state was not Louisiana, the laws here are similar. That is, a presumption exists that a person would not deliberately leave the ex as their beneficiary.
Although this case involved life insurance, the same reasoning could be applied to IRA and other similar benefits.
Mr. Hillman had been divorced and married to his new wife for six years when he died. All the evidence made it clear that he never intended to leave his ex as the beneficiary of his life insurance, but probably never gave any thought to making a change. Regardless, the Court held unanimously that the beneficiary designation trumps state law and the ex was therefore entitled to the life insurance proceeds.
The decision is based on a conflict between state and federal law. If a particular state law does not contradict federal law, it is assumed there would be no problem -but why leave your intent subject to conflicting laws and interpretations? Under Louisiana law you can still have your ex be the beneficiary as long as you make it clear that you intend to do so, not that it was an oversight.
Takeaway: why leave a headache for others to solve? Simply review all your beneficiary designations on a regular basis to make sure your money is going where you want it to go.