Most of us would agree that most divorced spouses don’t want their ex’s to hit the jackpot after one of them’s died because someone forgot to update his or her estate planning documents. You’d be surprised how often this happens.
So in 1951, when wills were the dominant estate planning tool, Florida enacted a statute automatically cutting divorced spouses out of each other’s wills (currently at F.S. 732.507(2)). Then revocable trusts grew in popularity, leading in 1989 to the revocable-trust version of that statute (currently at F.S. 736.1105).
In today’s world the dominant estate planning tool for most of us isn’t a will or trust, it’s life insurance or some other pay-on-death financial product (like annuities, pay-on-death brokerage or savings accounts, and retirement planning accounts). Which means a whole lot of Floridians found themselves litigating “who got what” when an ex-spouse forgot to change his or her beneficiary designation forms (see here, here, here). In 2012 we finally closed that legislative loophole with F.S. 732.703 (see here for my write up of that legislation).
There’s been zero case law in Florida testing the new statute’s constitutionality, but given the huge sums of money at stake, it’s probably only a matter of time. This line of attack’s been tried in lots of other states, with mixed results. After a few early wins, the tide has very much turned against the constitutional-challenge argument. And how do I know that? Because I read an excellent Florida Bar Journal article by Donna L. Eng and Scott Konopka entitled Is F.S. §732.703 Susceptible to a Constitutional Challenge by a Former Spouse Whose Claim for Benefits is Denied? Their conclusion? Don’t bet on winning a constitutional challenge in Florida. Here’s an excerpt summarizing their findings:
Although no Florida courts have addressed the constitutionality of F.S. §732.703, it would appear that . . . if a former spouse were to challenge [the statute] by arguing that [its] retroactive application . . . violates his or her rights as a designated beneficiary, or that the [statute] violates his or her rights to freedom of contract, as was argued in [Parsonese v. Midland Nat’l Ins. Co., 706 A.2d 814 (Pa. 1998)] and [Whirlpool Corp. v. Ritter, 929 F.2d 1318 (8th Cir. 1991)], such contentions should fail. As noted above, courts in other states and outside the 11th Circuit have noted the flaws in the Parsonese and Whirlpool analysis: 1) Beneficiaries to a life insurance policy have only an expectancy interest, and no vested rights in the policy; 2) decedents should expect that their policy designations would be regulated by the legislature; 3) public policy favors revocation on divorce statutes, as such statutes recognize the intent of a divorced spouse to revoke the designation of a former spouse as a beneficiary under the policy; 4) a revocation on divorce statute would not violate a beneficiaries’ freedom of contract because beneficiaries are not parties to the contract, and have no standing to raise such a claim; and, 5) revocation on divorce statutes do not violate the decedent’s freedom of contract because the statute only affects the donative transfer aspect of the life insurance policy.
US Supreme Court says “YES” to retroactive application of revocation-on-divorce statute for life insurance policies:
The Florida Bar Journal article I originally posted on was published in May 2017. The following year in June 2018 the US Supreme Court removed any remaining doubt regarding the constitutionality of revocation-on-death statutes in Sveen v. Melin, 138 S.Ct. 1815 (2018). By a vote of 8-1, the Court held that the retroactive application of Minnesota’s revocation-on-divorce statute [Minn. Stat. 524.2-804(1)(1)], which automatically nullifies an ex-spouse’s beneficiary designation on a life insurance policy or other will substitute, does not violate the Contracts Clause.
Here’s how the Court framed its holding as falling squarely within our legal system’s traditional and long-used application of default rules to resolve estate litigation in a way that conforms to decedents’ presumed intent:
Changes in society brought about changes in the laws governing revocation of wills. In addition to removing gender distinctions, most States abandoned the common- law rule canceling whole wills executed before a marriage or birth. In its place, they enacted statutes giving a new spouse or child a specified share of the decedent’s estate while leaving the rest of his will intact. See R. Sitkoff & J. Dukeminier, Wills, Trusts, and Estates 63 (10th ed. 2017), at 240. But more important for our purposes, climbing divorce rates led almost all States by the 1980s to adopt another kind of automatic-revocation law. So-called revocation-on- divorce statutes treat an individual’s divorce as voiding a testamentary bequest to a former spouse. Like the old common-law rule, those laws rest on a “judgment about the typical testator’s probable intent.” Id., at 239. They presume, in other words, that the average Joe does not want his ex inheriting what he leaves behind.
And against that backdrop, here’s how the Court summarized its rationale in this case:
True enough that in revoking a beneficiary designation, the law makes a significant change. As [respondent] says, the “whole point” of buying life insurance is to provide the proceeds to the named beneficiary. Brief for Respondent 16. But three aspects of Minnesota’s law, taken together, defeat [respondent’s] argument that the change it effected “severely impaired” her ex-husband’s contract. Ibid. First, the statute is designed to reflect a policyholder’s intent—and so to support, rather than impair, the contractual scheme. Second, the law is unlikely to disturb any policyholder’s expectations because it does no more than a divorce court could always have done. And third, the statute supplies a mere default rule, which the policyholder can undo in a moment.