SCOTUS issues opinion in Virginia divorce case


In a previous post, we discussed how the Supreme Court of the United States was currently considering Hillman v. Maretta, a Virginia divorce case that examined whether our state law was preempted by a federal statute.

To recap, federal employee William Hillman designated his then-wife Judy Maretta as beneficiary of his life insurance policy held by the Federal Employees' Group Life Insurance Act in 1996.

The couple divorced in 1998 and William Hillman later married Jacqueline Hillman in 2002. However, he failed to remove Judy Maretta as the beneficiary on the aforementioned life insurance policy and, as a result, the nearly $125,000 in life insurance proceeds went to her instead of Hillman upon his death in 2008.

Jacqueline Hillman subsequently filed a lawsuit against Judy Maretta in Fairfax County Circuit Court over the life insurance funds, citing a Virginia law that expressly names a widow/widower as the beneficiary of any life insurance policies and automatically revokes any designations of former spouses as life insurance beneficiaries.

The circuit court ruled in favor of Hillman and ordered the funds returned. The Virginia Supreme Court, however, reversed this decision, holding that federal insurance programs -- which named Judy Maretta as the primary beneficiary -- preempted Virginia's state law.

In a unanimous opinion issued just last week, SCOTUS affirmed the decision of the Virginia Supreme Court, ruling that the Virginia law did indeed interfere directly with the congressional intent behind FEGLIA, which "established a clear and predictable procedure for an employee to indicate who the intended beneficiary of his life insurance shall be."

They went on to argue that even though the way beneficiary designations are managed under FEGLIA may sometimes result in benefits going to unintended recipients, Congress nevertheless choose not to adopt a default rule favoring widowers or widows.

The result of this case should clearly serve as a reminder to all newly divorced spouses of the importance of updating their estate planning documents and making sure they follow all matters through to a final resolution.

Source: The Federal Times, "Ex-wife, as beneficiary, should get FEGLI benefits, high court rules," Stephen Losey, June 7, 2013; Courthouse News Service, "Justices side with first wife on insurance policy," Barbara Leonard, June 3, 2013 

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