Minn. Stat. § 524.2-804 Subd. 1 disinheriting spouse as beneficiary of a life insurance contract can apply retroactively without violating the contracts clause of the United States Constitution

Sveen v. Melin, June 11, 2018, 584 U.S. ____ (2018). Husband and wife were married in 1997. In 1998 husband purchased life insurance and named his wife as beneficiary and kids of a prior relationship as contingent beneficiaries. In 2002 Minnesota adopted Minn. Stat. § 524.2-804 which disinherits spouses from beneficiary designations upon divorce. It provides “the dissolution or annulment of a marriage revokes any revocable…beneficiary designation…made by the individual to the individual’s former spouse.” In 2011 the couple divorced. The beneficiary designation was not changed and the divorce decree made no mention of the insurance policy. At issue is whether a divorce under state law disinherits a spouse by retroactively applying the statute. The related question is whether the statute violates the Contracts Clause of the United States Constitution, Art. I, §10, Cl. 1. The Contracts Clause does not prohibit all laws affecting contracts, El Paso v. Simmons, 379 U.S. 497, 506-507. There is a two-step analysis to determine if the contract clause is violated. First, we examine whether the state law “operated as a substantial impairment of a contractual relationship.” Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244. To analyze the first test, the court examines (1) the extent that the law interferes with a party’s reasonable expectations, (2) undermines the contractual bargain, and (3) prevents a party from safeguarding or reinstating their rights. If there is a substantial impairment to the contract, then step two examines whether the law is an appropriate and reasonable method to advance a significant and legitimate public purpose. Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411-412. In general the argument for the ex-wife is that the statute voids the ex-wife as beneficiary even if he wanted ex-wife to remain as beneficiary and that if the husband wanted the ex-wife to get the insurance after a divorce, then he has to fill out a new beneficiary designation form and that is too burdensome and therefore unconstitutional. The kids argue, and the Court agrees, that the statute is actually intended to protect the probable intent of the decedent and that in most cases the preference is to revoke the beneficiary designation of the ex-spouse. In this case, a default rule such as revoking a spousal designation does not unduly interfere with the contract and works to protect the contract. The law can be applied retroactively.

About Robert McLeod

I can help you fight a will, fight a power of attorney, will contest, fight a guardianship, fight a conservatorship, create or revoke powers of attorney, wills or revocable trusts. What is probate? I can answer that for you. I can help you with all your probate needs.
This entry was posted in 524.2-804, Constitution, Contracts Clause, Life Insurance, Uncategorized, United States Constitution. Bookmark the permalink.