Smith v. Smith, 2005 WL 3439889, 30 Fla. L. Weekly D2845 (Fla. 5th DCA Dec. 16, 2005)

Both in the divorce context and for estate planning purposes, reviewing beneficiary designation forms for insurance policies, IRAs, and pension plan benefits is one of those “to do” items that often gets left to the end. Well, this case should be the sort of cautionary tale you may want to share with those clients who never quite get around to signing their change of beneficiary designation forms.

As part of Mr. and Mrs. Smith (that’s their real names) divorce, they signed a marital settlement agreement (prepared by Mrs. Smith) splitting everything up including, at least they thought, their respective insurance policies, IRAs and pension plans. Unfortunately for the beneficiaries of Mr. Smith’s estate, he sat on the change of beneficiary designation forms for a year and half before he died – without having executed the forms (oops!). Seminole County Trial Judge Nancy F. Alley sided with Mr. Smith’s estate, and ruled that the marital agreement was enough all by itself to entitle the estate to the disputed funds generated by Mr. Smith’s life insurance policies and retirement plan benefits. The Fifth DCA said not so fast, reversing the trial judge based on the following:

In Cooper v. Muccitelli, 661 So.2d 52 (Fla. 2d DCA 1995) (“Cooper I”), the Second District Court of Appeal held that “without specific reference in a property settlement agreement to life insurance proceeds, the beneficiary of the proceeds is determined by looking only to the insurance contract.” Id. at 54. The Florida Supreme Court affirmed, saying that a contrary holding would put insurance companies in an “impossible position.” Cooper v. Muccitelli, 682 So.2d 77, 79 (Fla.1996) (” Cooper II”). The high court pointed out that despite specific and clearly worded language in an insurance contract, a carrier could never be certain to whom to pay the proceeds. The lesson from Cooper I and Cooper II is that while it may be possible in a marital settlement agreement to waive one’s right as a beneficiary of insurance policies, that waiver can only be accomplished if the waiving party specifically gives up his or her rights to the “proceeds” of these policies.FN1 Otherwise, one must look only to the beneficiary designation made by the insured and filed with the insurer. In the present, case the marital settlement agreement fails to make specific reference to the proceeds of the life insurance policy in question, and the decedent, in the words of the Florida Supreme Court in Cooper II,”did just what he needed to ensure that the proceeds would go to [Ms. Smith]-he did nothing.” Cooper II, 682 So.2d at 79. He had a year and a half to execute change of beneficiary forms as required by his policy of insurance, but for whatever reason, he did not do so. Thus, Ms. Smith is entitled to the proceeds of the life insurance policies. (Emphasis added.) FN1. Obviously some other language such as “death benefits” would likely suffice.

The Fifth DCA came to the same conclusion with respect to the decedent’s IRAs and pension plan benefits: no change of beneficiary form means the disputed funds go to the original beneficiary – Mr. Smith’s ex-wife.