US Supreme Court Upholds Minnesota Revocation on Divorce Statute 524.2-804

United States Supreme Court Reverses Eighth Circuit, Holds Minnesota’s Revocation-on-Divorce Statute is Constitutional in Sveen v. Melin:  By: Karin Ciano, Mason & Helmers [edited with permission]

In December 1997, a Minnesota couple, Kaye Melin and Mark Sveen, got married.  Sveen bought a life insurance policy naming Melin as beneficiary, with his adult children from a former marriage as contingent beneficiaries.  Then the Minnesota legislature amended the probate code, providing that a divorce decree automatically revoked the beneficiary status of the former spouse, unless (among other exceptions) the parties’ divorce decree provided otherwise.  See Minn. Stat. § 524.2-804.

In 2007, Sveen and Melin divorced; their divorce decree said nothing about the insurance policy.  When Sveen died in 2011, Melin was still named as beneficiary.  An insurance interpleader action followed.  Melin and Sveen’s children each claimed the insurance proceeds.  Sveen’s children argued that Minnesota’s automatic-revocation-on-divorce statute applied to bar Melin’s claim; Melin argued that she and her ex-husband had orally agreed to maintain the beneficiary designation, and so the statute unconstitutionally impaired her rights in the policy.

In early 2016, the Honorable Paul A. Magnuson granted summary judgment for the Sveen children, holding that Minnesota Statute § 524.2-804 was constitutional because there was no substantial impairment of Melin’s contractual rights.  Melin appealed to the United States Court of Appeals for the Eighth Circuit.  The Eighth Circuit reversed, following circuit precedent in Whirlpool Corp. v. Ritter, 929 F.2d 1318, 1324 (8th Cir. 1991), on the theory that it was Mark Sveen’s contractual rights that had been impaired when the Minnesota legislature changed the law, and that the law could not apply retroactively.  The Sveen children appealed to the United States Supreme Court.

In June 2018, the Supreme Court reversed 8-1.  Justice Kagan, writing for the majority, framed Minnesota’s statute as a default rule used “to resolve estate litigation in a way that conforms to decedents’ presumed intent.”  Sveen v. Melin, 138 S. Ct. 1815, 1818 (2018).  The majority noted that as divorce rates increased, almost all states adopted revocation-on-divorce statutes, presuming “that the average Joe does not want his ex inheriting what he leaves behind.”  Id. at 1819.

Turning to the constitutional challenge, the majority acknowledged that the “threshold issue is whether the state law has operated as a substantial impairment of a contractual relationship”—that is, “the extent to which the law undermines the contractual bargain, interferes with a party’s reasonable expectations, and prevents the party from safeguarding or reinstating his rights.”  Id. at 1821-22.

As had the district court, the Supreme Court majority concluded that Melin’s constitutional challenge failed because (1) the statute was designed to reflect, not thwart, a policyholder’s presumed intent; (2) given divorce courts’ power to change beneficiary designations, a policyholder could not reasonably expect a beneficiary designation to survive divorce; and (3) if the policyholder didn’t like it, he could have it addressed in the divorce decree or by submitting a post-divorce change-of-beneficiary form.   In Justice Kagan’s words, “the statute this reduces to a paperwork requirement (and a fairly painless one, at that): File a form and the statutory default rule gives way to the original beneficiary designation.”  Justice Gorsuch, in his first solo dissent, would have held that the statute “substantially impairs contracts by displacing the term that is the ‘whole point’ of the contract”—the beneficiary designation.  Id. at 1829-30.

Takeaways:  the Supreme Court doesn’t consider a “minimal paperwork burden[]” such as filing a fresh beneficiary designation form to be a “substantial impairment” of contract.  If a divorcing couple can be bothered to mention the snowmobiles in their divorce decree, but not the life insurance, that’s on them.  And lawyers in Minnesota can go back to advising our divorced and divorcing clients to check their insurance paperwork and be sure it does what they want it to.

Advertisements

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, Beneficiary Designation, Divorce, Supreme Court, United States Constitution, United States Supreme Court. Bookmark the permalink.