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A Better Partnership
March 21, 2016

COA – Plain language of MCL 552.101 does not affect post-judgment action of decedent naming ex-wife as life insurance beneficiary

In In re Lett Estate, No. 326657, the Michigan Court of Appeals held that MCL 552.101, which requires a trial court granting a judgment of divorce to determine the rights of a wife to life insurance proceeds where she is named as beneficiary before or during the marriage, does not affect the post-judgment actions of the decedent in naming his ex-wife as a life insurance beneficiary.  The Court further held that the plain language of the divorce judgment merely cancelled the ex-wife’s interest in an insurance policy covering the decedent’s life at the time the divorce judgment was entered; it did not bar any interests created post-divorce.
 
In 2009, John Lett and Nancy Henson were granted a divorce by judgment.  The judgment provided that Nancy’s current interest in any life insurance policy on John’s life was cancelled.  It also required John to make monthly payments to Nancy on his half of a home equity line of credit (“HELOC”) totaling $28,500, while also maintaining a life insurance policy of not less than $28,500, with Nancy as the beneficiary, until this obligation was met.  In 2010, John failed to make his monthly payments and Nancy initiated contempt proceedings.  During this period John also failed to purchase the life insurance policy for $28,500.  At the time of the contempt hearings John began making his monthly payments and entered into a group life insurance policy naming Nancy as the sole beneficiary.  In July 2012, John paid off his HELOC obligation to Nancy, but did not change his beneficiary designation on the group life insurance policy.  John died in July 2014. 
 
After John’s death, his son Craig Lett, as personal representative, filed a petition in the probate court requesting that the proceeds of the group life insurance policy be paid to his estate.  Nancy filed for summary disposition seeking her rights to the proceeds.  The probate court denied Nancy’s motion and held a trial, after which it found that Nancy’s interest in the proceeds were voided by MCL 552.101 and the language of the judgment of divorce.  Nancy appealed.
 
The Court of Appeals held that the trial court erred by not granting Nancy’s motion for summary disposition.  According to the Court, MCL 552.101 simply requires a trial court to determine the rights of a wife to proceeds of her husband’s life insurance policy where she was designated as beneficiary in anticipation of or during the marriage.  MCL 552.101’s plain language did not apply to John’s post judgment actions in adding Nancy as sole beneficiary to his group life insurance policy and failing to remove her designation for two years after he paid his HELOC obligation and his death in 2014.  The Court held that it was particularly telling that John failed to provide for a contingent beneficiary and did not remove Nancy for two years.  The Court also held that the plain language of John and Nancy’s judgment of divorce simply cancelled Nancy’s interest in John’s life insurance at the time the judgment was entered.  Furthermore, the Court held that Craig failed to allege any other basis by which to void Nancy’s designation, “such as fraud, severe stress, or mutual mistake of fact.”
 
Accordingly, the Court of Appeals vacated the probate court’s order and remanded the case for entry of judgment in favor of Nancy on the petition regarding John’s life insurance proceeds.

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