Florida Statute 732.703
In the typical divorce, it is probably fair to say divorced spouses do not wish for a former spouse to remain as a primary beneficiary on a life insurance policy. However, it is fairly common for a life insurance policyholder to keep their former spouse as the primary beneficiary when estate plans and insurance policies are not properly updated.
Upon a policyholder’s death in Florida, this traditionally meant that life insurance policy benefits could pass to a divorced spouse. By contrast, Florida has had decades-old laws that automatically remove divorced spouses from each other’s wills (Section 732.507(2) of the 2017 Florida Statutes) and revocable trusts (Section 736.1105).
No law existed, however, for automatically removing divorced spouses from beneficiary-designated assets like an insurance policy. This is true despite the fact beneficiary-designated, nonprobate assets have become an increasingly popular strategy for passing on wealth.
Florida lawmakers passed an important 2012 amendment to Section 732.703 of the 2017 Florida Statutes that addresses this very issue.
Florida’s Treatment of Nonprobate Assets Transfer Prior to the 732.703 Amendment
Nonprobate assets are generally transferred by designating a beneficiary, which is certainly true of life insurance policies. Prior to 2012, there was no statute that voided the designation of a life insurance policy to a former spouse upon a decedent’s passing.
Since there was no law on the books designed to address the issue, lawsuits involving the disposition of nonprobate assets ensued. In the 1996 case of Cooper v. Muccitelli, 682 So. 2d 77, 79 (Fla. 1996), the Florida Supreme Court held that a former spouse named as a life insurance beneficiary was entitled to life insurance benefits. The insured spouse did not take steps to remove the former spouse as an asset beneficiary, and the couple’s marital settlement agreement did not specifically remove the spouse.
For this reason, the Court determined that the former spouse was entitled to the assets as a designated beneficiary based upon the language of the insurance contract itself.
A Closer Look at the Section 732.703 Amendment
In 2012, Florida lawmakers took steps to close the loophole that allowed spouses to litigate over nonprobate assets when beneficiary designation forms were not updated post-divorce.
Broadly, the amendment to Section 732.703 generally makes void a spouse’s designation of non-probate assets to a divorced spouse. The statute’s language spells out that if certain provisions are met, an asset like a life insurance policy is meant to pass as if a former spouse passed away before the decedent.
This principle permits a life insurance company to pay a secondary beneficiary if the decedent’s death certificate indicates the decedent is not married or is married to someone other than their former spouse upon death.
However, if certain criteria are met, the general presumption that nullifies the designation of a life insurance policy to a former spouse can be overcome.
When a Section 732.703 Beneficiary Designation Is Not Void
A few of the circumstances when a beneficiary designation to a former spouse is not void under the terms of Section 732.703 include, but are not limited to:
- Federal law provides otherwise, as federal law supersedes state law
- Asset disposition is governed by a will or trust
- An instrument governing the life insurance policy expressly states that the asset is payable to a designated former spouse after divorce
- A court order requires the decedent to obtain or maintain the life insurance policy for the benefit of the former spouse and children from the marriage as spousal and/or child support
These are just a few of the many considerations to keep in mind when considering how a divorce may impact a life insurance policy’s beneficiary designation to a former spouse.
Section 732.703 Also Requires Insurance Companies to Pay the Correct Beneficiary
The statute also spells out the responsibility of life insurance companies as well, as the statute requires the payor of a decedent’s life insurance policy to follow the amended law set forth in 732.703.
Beneficiaries in Life Insurance Cases with Divorce and Probate Issues
Obviously there is a lot at stake when a life insurance policy exists and issues of transfer arise. Questions such as the following may need to be addressed:
- What happens in cases of divorce when the policy is not updated?
- Who is the rightful beneficiary?
- Can there be more than one possible beneficiary?
- Are you actually entitled to death benefits even if the insurance company told you otherwise?
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].
Cooper v. Muccitelli 682 So. 2d 77 - Fla: Supreme Court, 1996