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Ex-wife As Beneficiary In A Life Insurance Policy

A husband and wife of 25 years filed for divorce. The husband agreed to pay alimony until 2001. He also agreed that he would obtain an insurance policy and name his ex-wife as beneficiary “to a portion of the proceeds on such policy in a face amount sufficient to pay the then remaining alimony payments…”  After the divorce, the husband bought a $250,000.00 policy and named his ex-wife as the beneficiary.

Husband Remarries

Several years later, husband remarried. He contacted the insurance company about changing the beneficiary on the policy and limiting his ex-wife’s part to what was due under the alimony agreement. The insurance company sent him a change of beneficiary form but he never filled it out.

Later, in his divorce from his second wife, husband wrote a letter to his divorce attorney outlining what he wanted to keep in the divorce. He mentioned three insurance policies: the $250,000.00 policy mentioned above and two policies for $100,000.00 each. He said that one of the $100,000.00 policies was “…required to be used as collateral in my payment to…” first ex-wife based on the alimony agreement in their divorce.

Husband Dies

Husband died in 2002. When he died, the first ex-wife and his children filed competing claims for the $250,000.00 policy. The children argued that the first ex-wife was a creditor beneficiary and should only recover an amount not to exceed the debt (the alimony.) Since the alimony was fully paid by husband and had ended in 2001, they argued that the first ex-wife was not entitled to any part of the policy. The ex-wife said that she was named the beneficiary without limitations and she should receive the full $250,000.00.

The trial court agreed with the children and awarded them the proceeds from the policy. The wife appealed.

The Appeal

The appeals court agreed with the wife and reversed the trial court. The appeals court said that the husband did not limit the ex-wife’s recovery to the amount owed for alimony nor did he mention the divorce settlement in the beneficiary designation of the policy. The appeals court also noted that husband did not change the beneficiary when he was sent the change of beneficiary form by the insurance company. They awarded all of the policy to ex-wife and none to the children. 252 S.W.3d 663.