Saturday, June 8, 2013

Supreme Court sides with designated beneficiary

I'm in vacation mode, so I'm late in blogging about last Monday's US Supreme Court ruling in Hillman v. Maretta, which I wrote about here when it was argued.  (Refer to that post for all the facts and arguments on both sides.)

The Court has unanimously affirmed the Virginia Supreme Court's holding that federal law preempts a state statute allowing a current spouse to recover a deceased federal worker's life insurance proceeds from a designated beneficiary who was the worker's ex-spouse.  Although I found good policy arguments on both sides, this was the result I wanted.  The Court found that the intent of the federal life insurance program was to pay the proceeds to whoever an employee choses. (The employee can change his or her beneficiary at any time and this information is conveyed to employees.)  Any state law frustrating that purpose is preempted, and that's what the Virginia statute at issue did.  Maybe Hillman intended to revoke his ex-wife when they got divorced (which was 10 years before he died), but he never did that.  The designation governs, so she gets the money, and Virginia can't circumvent the federal statute by allowing Hillman's widow to sue the ex-wife for the proceeds.

This is a victory for allowing an employee to decide who should get financial compensation when he or she dies.  I like this.  An employee can pick an umarried partner (same- or different-sex) without fear that his or her parents will claim to be next of kin and entitled to the money. 

When an employee does not choose there is a listed order of precedence, with a widow or widower at the top.  This is what we would expect in our legal system.  But I think that's the wrong choice.  The top should be reserved for minor children. When Congress first wrote these laws the divorce rate was much lower and there were fewer nonmarital births. An employee's minor children probably lived with his (more likely to be his then) widow.  Now, when an employee does not designate a beneficiary, the proceeds go to the widow/widower, even if the employee's minor children are being raised by an ex-spouse. 

Minor children can't take care of themselves.  Adults (including the widow or widower) usually can.  The first order of precedence, therefore, should be those children.  This is the "beyond marriage" approach.

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