In Aderholt v. Aderholt (2016 WL 7321570), the Alabama Supreme Court upheld the trial court's award of $150,000 in policy benefits to the designated beneficiary. The dispute was between the deceased's mother and ex-wife.
The deceased had designated his ex-wife as the policy beneficiary while they were married. They divorced eleven years later. The 2004 divorce decree provided that he would pay her alimony of $500 per month for 15 years. The decree also provided:
“Each party shall retain ownership of their own life insurance policies. [Sandra] shall remain as the sole beneficiary on [Bobby’s] whole-life-insurance policy through Alfa which has a death benefit of $150,000.00. He shall maintain this insurance and maintain her as the beneficiary for a period of fifteen (15) years.”
He complied with the divorce judgment, maintaining the ex-wife as the beneficiary of the policy and paying her $500 per month in alimony until he died on December 12, 2014.
After he died, the deceased's mother argued that the ex-wife should not receive the life insurance benefit. Her argument was that the divorce judgment had required her son to maintain his ex-wife as the beneficiary for 15 years because the policy was intended to secure the 15 years of monthly $500 alimony-in-gross payments, not to function as an award in itself. In her view, the ex-wife was entitled to, at most, the remaining unpaid alimony-in-gross payments, which she claimed totaled $28,500. Anything beyond that should belong to the deceased's estate.
The ex-wife countered that she was the designated beneficiary and should be paid as such. And the divorce decree required her to be the beneficiary for at least 15 years.
The Alabama court agreed with the ex-wife's argument. The court conceded that Alabama state and federal courts have, under certain circumstances, disregarded a party’s presumptive contractual rights to the proceeds of a life-insurance policy in order to do equity and to prevent unjust enrichment. However, in this case the court found no compelling evidence that the deceased wanted someone beside his ex-wife to receive the entire policy benefit. Under the facts of the case, the court was unwilling to presume the deceased would not have wanted his ex-wife to receive only the portion of the benefits securing the remaining alimony obligation.
Note that the facts in every case are different, as are the laws of each state. Please consult an experienced life insurance beneficiary dispute lawyer.