by: Kenneth J. Lackey
In an opinion approved for publication, the New Jersey Appellate Division denied a widow's request to "adopt a 'bright-line' rule that marriage creates a 'presumptive right' to a spouse's life insurance benefits, thereby revoking any contrary premarital beneficiary designation made by the deceased spouse."
In Fox v. Lincoln Financial Group (available here), the decedent purchased a life insurance policy while married to his first wife. He designated the first wife the beneficiary of the life insurance policy. After divorcing that first wife, he executed a beneficiary designation change form with his insurance company naming his sister the beneficiary. Subsequently, the decedent married Fox, a Brazilian national. He died less than four months later, having taken no steps to designate Fox the beneficiary on his life insurance policy.
The sister, the designated beneficiary, and Fox both claimed the death benefit. Fox argued her situation represented the "reciprocal" of a prior New Jersey decision regarding life insurance, Vasconi v. Guardian Life Ins. Co. of Am., 124 N.J. 338 (1991). In Vasconi, while married, the decedent designated his then-wife beneficiary of his life insurance policy. When they divorced, husband and wife executed a property settlement agreement by which they each waived all claims against each other, including claims against each other's estate. However, the husband never changed his life insurance beneficiary designation. When he died, the ex-wife claimed the benefit. The New Jersey Supreme Court denied the ex-wife's claim, recognizing a "limited exception" to the general rule that the death benefit goes to the designated beneficiary in a situation, presented in Vasconi, where the ex-spouses released all claims against each other. Thus, because of the waiver/release in Vasconi, the Supreme Court ordered the death benefit be paid to the decedent's estate rather than his ex-wife the designated beneficiary.
In Fox, the plaintiff widow analogized her situation to the Vasconi case and argued that whenever an insured gets married, the existing beneficiary designation should be automatically revoked and the new spouse should automatically be the beneficiary. The Appellate Division declined to adopt such a rule, deferring to the Legislature to decide whether to implement such a "drastic change" to existing law.
One of the takeaways from the Fox case is a reminder that marriage is an important time to review estate planning.