Changing beneficiaries after divorce in Pennsylvania

Changing your beneficiaries after divorce is extremely important, as illustrated by a 2007 case before the Pennsylvania Supreme Court.

In this case, a husband designated his wife as primary beneficiary on his employer-provided life insurance policy. Four years after the couple divorced, the man died without having changed his primary beneficiary designation to his nephew, his secondary beneficiary. The ex-wife was issued the insurance proceeds, as she was on the paperwork held by the insurance company.

The ex-husband’s estate litigated all the way to the Pennsylvania Supreme Court – and the ex-wife won the insurance proceeds. The Supreme Court ruled that the federal Employee Retirement Income Security Act (ERISA) in 1974 established a uniform, national law governing employee retirement and benefit plans. The Supreme Court opined that ERISA law clearly requires that each employee’s insurance plan documents control the identity of the employee’s beneficiaries, not their marital status.

In this situation, federal law on employee benefits superceded state divorce and estate law. Thus, an ex-spouse, even though divorced, if still named as beneficiary on an employer-provided insurance policy will, according to recent Pennsylvania Supreme Court ruling, receive the proceeds upon death of an ex-spouse.

If the policy had been privately issued (not through an employer), the outcome would have been different, as state law would likely prevail.

Courts are constantly balancing state law, which oversees divorce and estate law, with federal law, which can trump issues related to employers, employees and benefits. Rather than take a gamble that your wishes will be followed after your death, it is wise to examine all insurance, retirement and other such financial documents, whether employer-issued or not, to be sure your designated beneficiaries are as you wish them to be. I can assist you with this task, as needed.