Mark Sveen and Kaye Melin married in 1997. When Sveen purchased a life insurance policy in 1998, he designated Melin as the primary beneficiary and his two children from a prior marriage as contingent beneficiaries. The couple divorced in 2007. The life insurance policy was not mentioned in the divorce decree, and the same beneficiaries were in place when he died in 2011. Under Minnesota law, a spouse’s designation as a beneficiary for life insurance or a retirement plan is revoked upon divorce. However, Sveen’s children and Melin made competing claims for the insurance proceeds and the case came before the Supreme Court.
A question that underlies the court’s analysis in Sveen v. Melin (2018) involves the appropriate default rule for predivorce spousal beneficiary designations in life insurance policies and retirement plans—an issue that raises interesting psychological questions about the preferences of divorcing spouses.
Almost all states revoke a spouse’s status as a beneficiary when couples divorce, but the rules are more varied when it comes to life insurance policies and retirement plans. The federal statute governing pension plans (ERISA) and the laws in 24 states leave predivorce designations in place after divorce. Laws in the other 26 states revoke such designations when a couple divorces.
To be sure, a divorcing spouse can change a beneficiary at any time. In fact, a divorcing spouse can designate a new beneficiary and even redesignate a former spouse if state law revokes such designations. But because some divorcing couples do not get around to making these sorts of changes, the default rule matters. The law attempts to set default rules that reflect the probable intent of the deceased. In the absence of psychological research about the likely intent of divorcing couples, the court was left to hypothesize about such preferences. To that point, the court’s majority opinion asserts: “Although there are exceptions, most divorcees do not aspire to enrich their former partners. (And that is true even when an ex-spouse has custody of shared children, given the many ways to provide them with independent support.)” It also notes that an “insured’s failure to change the beneficiary after a divorce is more likely the result of neglect than choice.”
Justice Neil Gorsuch, the sole dissent in the case, contended instead that some policyholders might want their former spouses to retain these financial rights if there is shared custody or a more amicable marital dissolution. He further observed that this practice “can be a cheaper, quicker, and more private way to provide for minor or disabled children than leaving the matter to a trustee or other fiduciary.”
Studies have explored the probable intent of those who die without a will. Research has, for example, explored people’s preferences for distributing property to committed, but unmarried, partners or for dividing property among heirs with different relationships to the deceased (e.g., parents and children). But the preferences of divorcing couples for handling predivorce beneficiary designations in life insurance policies and retirement plans is an open empirical question. Attention might also be given to related questions about divorcing couples’ preferences about who should handle their affairs when they are incapacitated yet have not designated someone to make decisions for them under health-care or property powers of attorney. Research that addresses these questions will have important implications for how states choose to structure default rules upon divorce.
"Judicial Notebook" is a project of APA Div. 9 (Society for the Psychological Study of Social Issues).
