Can a spouse override a life insurance beneficiary?

Life insurance is an important part of financial planning because it helps your loved ones maintain their quality of life in the unfortunate event of your death. (And to be clear, we mean on a financial level, not an emotional one.)

Most of the time, a spouse is the primary beneficiary on a life insurance policy. This is for obvious reasons — the partner left behind will be tasked with making up for lost income to pay for bills, housing, day-to-day things like groceries, and so much more. (Especially if there are children.)

But what would happen if your spouse passed away, and the beneficiary is … someone else? Can you override or change it? Here’s what you can — and just importantly, can’t — do in the event that your spouse names someone else as a beneficiary on their life insurance policy.

What is a life insurance beneficiary?

A life insurance beneficiary is the person or persons you name to receive the death benefit of your life insurance policy. The death benefit is the money paid out when the person who purchased the policy dies. It’s typically a lump sum payment, and is usually tax-free.

There is typically a primary beneficiary, and you might also have a secondary beneficiary (a person who receives some portion of the benefit, along with the primary beneficiary). You might also have a contingent beneficiary — that is, someone who becomes the beneficiary if the primary beneficiary dies before, or at the same time as, the insured person.

Why would a spouse want to override a life insurance beneficiary?

Simply put, if you believe you are your spouse’s chosen beneficiary, and that turns out not to be the case, you would probably want to explore your options.

There are several reasons a spouse might not be named as the beneficiary:

• The deceased spouse purchased the policy before the marriage and forgot to update the beneficiary.
• The deceased might have chosen someone else (such as an adult child or even a beloved charity) instead of a spouse to receive the benefits.
• There might be other assets equal to or greater than the insurance payout left to the remaining spouse.
• Unknown (and unknowable) reasons that were never communicated.

Most spouses in this situation would want to try and contest the beneficiary. They might have depended on their partner for income and now have no way to make mortgage payments or maintain the quality of life they are used to. They might also need to take time off from work to grieve and recover from the loss, reducing their ability to work.

End-of-life expenses can add up — many life insurance policy payouts are used for final expenses, and the surviving spouse might have expected the policy to cover those costs. They might even feel betrayed by their partner, not understanding why someone else is the beneficiary.

Can a spouse override a life insurance beneficiary death benefit?

The short answer is no. But complicated state laws allow for limited exceptions, and courts are the ones who decide on the exceptions. Generally, once the policyholder dies, the death benefit is paid to the beneficiaries according to the state’s laws with jurisdiction over the policy.

When policies are active, only the policyholder can change the beneficiaries. In most cases and states, a spouse cannot override term life insurance beneficiaries. Occasionally, even the policyholder cannot change the recipient (such as if the policyholder chooses to make the beneficiaries irrevocable).

A will cannot override a beneficiary designation because the policy is a contract between the person who purchases it and the issuer.  The only way anyone can override a beneficiary other than the policyholder is if a court determines there’s a conflict between named beneficiaries and state laws.

It’s best to discuss your options with an attorney or other expert. Doing so will help ensure you have legal authority or confirm a specific exception is applicable to your situation.

Community property states

Community property states have laws that split property acquired during a marriage in half. When a couple divorces, all assets purchased or earned during the marriage are split between the two parties because the law views ownership of these policies as 50/50.

If one spouse purchases term life insurance coverage, the other spouse is generally the beneficiary unless another is specified.  If there is a beneficiary other than the spouse, the spouse cannot override it. However, they are usually entitled to half the death benefit because the law splits community property in half. Half the benefits go to the spouse and half to the listed beneficiary.

There are nine community property states:

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

Tennessee and Arkansas are opt-in states, meaning spouses can elect to participate in the state’s community property laws. You can choose whether your marriage is a community property or equitable distribution marriage.

Are there exceptions to community property laws?

Life insurance policies issued by federal agencies such as the Federal Employees’ Group Life Insurance (FEGLI) Program or the Service Member’s Group Life Insurance offer no ability to split the benefit between the beneficiary and spouse in community property states. The beneficiaries named are the ones who receive life insurance death benefits. This is because the Employee Retirement Income Security Act governs the beneficiaries of a federally-sponsored life insurance plan and overrules state laws.

Equitable distribution states

The remaining states use equitable distribution, where laws place assets in a bundle and distribute them according to payout priority.

Most equitable distribution states let the courts evaluate assets upon a person’s death, dividing them according to state laws. Term life insurance policies generally can’t be divided between survivors because they designate beneficiaries and amounts.

Exceptions to changing beneficiaries

There are exceptions to life insurance payout rules, but they vary by state. In some states, the intent behind buying the policy matters, as does the timing. It’s best to speak to a life insurance specialist or a lawyer familiar with your state’s life insurance laws.