Virginia's General Assembly recently finished its work for the year, and tried to remedy the conflict between state and federal laws on what happens to an insurance beneficiary designation for a spouse when there is a divorce. The problem came to a head with a recent Virginia Supreme Court decision saying that Virginia Code § 20-111.1, which automatically revokes beneficiary designations upon divorce unless the divorce decree or agreement said otherwise, could not be applied to federal employees. (Which implies that it couldn't apply to veterans or servicemembers, either.) But there have been problems in individual cases for years.
The legislature's solution, for now, is HB 282 Divorce or annulment; revocation of death benefits; notice. It amends the statute on beneficary designations being revoked by divorce, NOT by removing or changing the language that tries to overrule federal preemption of the state statute, but by adding:
E. Every decree of annulment or divorce from the bond of matrimony entered on or after July 1, 2012, shall contain the following notice in conspicuous, bold print:
Beneficiary designations for any death benefit, as defined in subsection B of § 20-111.1 of the Code of Virginia, made payable to a former spouse may or may not be automatically revoked by operation of law upon the entry of a final decree of annulment or divorce. If a party intends to revoke any beneficiary designation made payable to a former spouse following the annulment or divorce, the party is responsible for following any and all instructions to change such beneficiary designation given by the provider of the death benefit. Otherwise, existing beneficiary designations may remain in full force and effect after the entry of a final decree of annulment or divorce.
To avoid thereby misleading people who have life insurance other than FEGLI or SGLI, it would be prudent and useful for that notice to add, “And then again, they may not. It depends on what kind of benefits they are, and on state and federal law.” The new legislation also does nothing about federal employees, retirees, servicemembers and veterans who are already divorced, who are also affected by the recent court decision. At least it provides another occasion to get the word out to them that they need to check their beneficiary designations.