Estate Planning Newsletter – September 15, 2017

October 20th, 2017   •   Comments Off on Estate Planning Newsletter – September 15, 2017   


Life insurance after a divorce can be tricky.  The case of Hughes v. Hughes dealt with a dispute over proceeds of the Decedent’s Federal Group Life Insurance policy (“FEGLI”) after the Decedent’s divorce from the Plaintiff’s mother.  The Decedent designated his brother as the sole beneficiary of his FEGLI policy before his divorce.  The Final Divorce Decree incorporated a Marital Dissolution Agreement (“MDA”) which required the husband to maintain his FEGLI policy in place, with his children as beneficiaries.  No change in beneficiary form was ever filed with the insurance company.  After the Decedent died, all insurance proceeds were paid to the Decedent’s brother.


The children filed suit to impose a constructive trust on the proceeds, citing the MDA provisions as proof that the benefits belonged to them.  The children also alleged the Decedent’s brother received the life insurance proceeds through fraud.  The brother won the case on the basis that federal law governing the FEGLI policy preempts state law (being the state court MDA that ordered the Decedent to designate the children as beneficiaries of the FEGLI policy).


The Court of Appeals pointed out that under Tennessee law, the MDA gave the children a vested interest in life insurance policies governed by Tennessee law.  However, insurance policies issued under and governed by federal statutes are an exception to Tennessee law.  These policies are not creatures of contract but of federal law, which preempts state law and yields a different result.  The Court pointed to the legislative history of FEGLI that Congress enacted FEGLI to provide low cost group life insurance to federal employees.  Any change to a beneficiary form is required to be signed, witnessed, and filed with the government.  Requirements of FEGLI policies are strictly construed.


The Court of Appeals wrote that an MDA under state law conflicts with federal statutory law as to the order of precedence for beneficiaries of a FEGLI life insurance policy.  Although not relevant in the facts in the Hughes case, the Court did point out that under the FEGLI, if a certified copy of the Court Order had been sent to the employer before the death of the insured, FEGLI would have been required to honor that Court Order.


MY RECOMMENDATION:   There are three take aways from the Hughes case:

(1)   Be sure of the scope and nature of a life insurance policy required to be maintained under an MDA.

(2)   Be sure the insurance company has a copy of the MDA and get confirmation of the same.

(3)   Be aware of insurance offered through federal policies (such as FEGLI, and Serviceman’s Group Life Insurance available to members of the armed services), and the effect of federal statutes preempting state law.


Yours very truly,





William C. Bell, Jr., Attorney at Law