Life Insurance Beneficiary Rules for Spouse: Your Legal Rights to Death Benefits

Many people wonder whether there is a special set of rules applicable to life insurance beneficiaries. You may also wonder whether spousal rights are the same as beneficiary rights. This article will address these and many other topics about spousal and beneficiary rights.

Simply put, a life insurance policy is a contract between the insurance company and the owner of the policy. This contract outlines rules about naming, changing, or removing beneficiaries. A beneficiary is a person who is named in this contract as a recipient of the life insurance proceeds in the event of the insured person’s death. The beneficiary may be a spouse, a relative, a minor child, an adult child, a friend, a trust, etc. Usually, the owner of the policy may name any person or an entity as the beneficiary.

can a spouse override a beneficiary

Does the Surviving Spouse Automatically Become the Beneficiary of a Life Insurance Policy?

Usually, there is no requirement in the policy itself that only a spouse be named as the beneficiary. The policy owner has the right to choose any beneficiary they wish. Likewise, the policy owner has the right to change their designation. However, if the policy owner chooses to name their beneficiary as irrevocable (versus revocable), he or she will not be able to later remove or modify this designation. Revocable designations, on the other hand, are easily changed. To be valid, a beneficiary change/designation must be made according to the rules outlined in the life insurance policy itself and must be received, approved and recorded by the insurance company. 

Another scenario where the policy owner may be restricted in choosing the beneficiary is when there is a court order, such as a divorce decree, that obligates the policy owner to name a specific person as the beneficiary. For example, if the divorce decree obligates the husband to carry a private life insurance policy in the amount of $250,000 for the benefit of his children, the husband will not be able to remove the children as beneficiaries and name someone else. This restriction, however, does not automatically apply to such policies as SGLI, VGLI, and FEGLI. The person who is planning to enforce such a divorce obligation needs to make sure that the insurance company is put on notice and that the designation is irrevocable. 

A life insurance policy also sets out rules about what happens when there is no named beneficiary. In many policies, the surviving spouse automatically receives the life insurance proceeds when no beneficiary is named at the time of the insured’s death. In others, the money goes to the estate of the insured. It is common for the insurance company to outline the order of precedence that governs who has the right to collect the proceeds when there is no beneficiary.

Can Spousal Rights Override Beneficiary Designations?

There is no short answer to this question. It all depends on the type of the life insurance policy, the state where it was issued, the state where the couple lived, and the way the premiums were paid. For example, in community property states, certain types of life insurance policies may be considered community property if couples used community funds to pay for such policies. There are exceptions to these rules and is it always wise to consult a life insurance attorney.

Are Life Insurance Policies Marital Property in Community Property States? 

Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In Alaska and Tennessee, adhering to the community property laws is optional. If you live in a community property state, community property laws may trump beneficiary designation on a life insurance policy under certain circumstances. Since both spouses have an equal share of any income earned during the marriage, they also equally own any property purchased with that money. If a life insurance policy was purchased with community property income (if premiums were paid using community property money), the surviving spouse may file a life insurance claim for half or a portion of the policy proceeds if someone other than the spouse is listed as the beneficiary. The beneficiary will receive the rest. 

Community property law may not apply if the decedent obtained his or her life insurance through work. Group benefit plans are often subject to ERISA (the Employee Retirement Income Security Act of 1974). ERISA is a federal law that preempts state laws such as community property state laws. This means that unless the surviving spouse is listed as the beneficiary of the employer-sponsored life insurance policy, she or he may not be entitled to half of the death benefit. You can learn more about this from our blog post on ERISA preemption.

does spouse automatically become beneficiary of life insurance

Can Spouses in Community Property States Waive Rights to Life Insurance Benefits?

If a spouse wishes to waive his or her right to a certain life insurance policy, the couple may sign an agreement specifying the policy will be considered separate (not community) property. Usually, the insurance company needs to be put on notice of such waiver of spousal rights. In some cases, the insurance company may ask the spouse who wishes to waive his/her rights to sign a consent form. In order to be valid, agreements waiving spousal rights must comply with state law requirements. 

What Happens When the Insured Forgets to Remove an Ex-Spouse as the Beneficiary?

When a couple goes through divorce, it is ideal to discuss life insurance policies as part of the property settlement agreement. In this case, the policy is included in the divorce decree, the insurance company is notified of the divorce agreement and both parties are clear as to what happens in case of the insured’s death. If, however, a life insurance policy is not part of the divorce decree and the insured spouse forgets to remove his/her ex-spouse as the beneficiary, conflict often arises as to who is entitled to get the life insurance benefit after the insured’s death. 

Under many state laws, an ex-spouse is automatically revoked as a beneficiary to a life insurance policy unless the ex-spouse is able to show that there was a written agreement to keep him/her as the beneficiary in spite of the divorce. Not all life insurance policies fall under these revocations laws. For example, life insurance policies controlled by federal laws will pay to the listed beneficiary regardless of the conflicting state laws. 

What happens if a couple divorced and decided to keep each other as beneficiaries on their policies without executing a written agreement and without putting the insurance company on notice of such verbal agreement? Such cases are extremely complicated and the insurance company will most likely have to file an interpleader and let the court decide whether a verbal agreement is sufficient to take the case out of the state law revocation requirement.

Learn more about life insurance claim for benefits and divorce.

is your spouse automatically your beneficiary

When to Hire a Life Insurance Lawyer

There are many aspects to beneficiary and spousal rights. They vary not only from state to state but also from case to case. Every situation is unique and the general rules outlined above may not apply to your specific situation. If you’re not sure about your rights or have questions about the process, speak with our life insurance attorney about your options. We collect life insurance claims fast and work with our clients through difficult times involving a family dispute, beneficiary contests, denied life insurance claims, delayed life insurance claims, and interpleader actions.

Read this case where we recovered the benefits for an ex-spouse whose benefits were wrongfully denied.

In case you or someone you know has issues with a denied life insurance claim, we’re here to help. Call us at (888) 510-2212 for a free consultation with one of our lawyers.

If you are the beneficiary of an employer-sponsored life insurance plan, read our blog post about ERISA life insurance beneficiary designation to learn more about your spousal rights to death benefits.

by Tatiana Kadetskaya

by Tatiana Kadetskaya

Attorney Tatiana Kadetskaya has over 10 years of experience in life insurance law representing beneficiaries and policy owners. She is best known for successfully collecting denied and delayed claims and settling complex beneficiary disputes and interpleader lawsuits.

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