Warren Hillman died unexpectedly in 2008. His wife spent the next five years trying to collect the proceeds from his Federal Employees’ Group Life Insurance (FEGLIA). Adding to the indignity, the U.S. Supreme Court decided that his ex-wife, rather than his wife, was entitled to his FEGLIA proceeds–totaling over $100,000. Hillman v. Maretta, No. 11-1221, 2013 Lexis 4167 (U.S. Jun. 3, 2013).
The Supreme Court’s decision turned on whether FEGLIA preempted an applicable Virginia State statute, which would have given the life insurance proceeds to his widow. Regardless of the legal analysis, however, this issue was entirely preventable. And for you, it still is.
After years of litigation between his widow and his ex-wife, Mr. Hillman’s ex-wife reaped the benefits of his federal life insurance proceeds simply because Mr. Hillman never updated his named beneficiary. The Supreme Court explained the circumstances:
Warren Hillman (Warren) and respondent Judy Maretta were married. In 1996, Warren named Maretta as the beneficiary of his FEGLI policy. Warren and Maretta divorced in 1998 and, four years later, he married petitioner Jacqueline Hillman. Warren died unexpectedly in 2008. Because Warren had never changed the named beneficiary under his FEGLI policy, it continued to identify Maretta as the beneficiary at the time of his death despite his divorce and subsequent remarriage to Hillman.
(Hillman, slip op. at 4.) Don’t let this be you.
Avoid the wasted time, cost, and heartache by reassessing your affairs and your business requirements at least once a year–and more frequently as appropriate. Are you and your family up-to-date in your estate planning, your insurance coverage, your licensing, and your regulatory compliance? Is your business fully insured, licensed, and otherwise in compliance with the vast array of applicable local, state, and federal regulations?
Be disciplined and take the time to audit your life and your business. You may avoid years of needless litigation and expense–and more importantly, your widow won’t have to lose everything to your ex-spouse at the Supreme Court. In short, learn from Mr. Hillman’s oversight.
The most successful litigation is often the litigation that never occurs. If you have questions about where to begin or whether you are prepared, consult a tax consultant or an attorney today. You may contact Mr. Samuel C. Moorehere.
