Life Insurance Beneficiary Disputes: Why the Answer Depends on Who Issued the Policy

Two people claim the same death benefit. The ex-spouse is still named on the form. The children say the divorce wiped her out. Everyone reaches for Minn. Stat. § 524.2-804, which does exactly that — it revokes a beneficiary designation in favor of a former spouse by operation of law.

That is often the wrong place to start, and the reason is structural. Minnesota’s revocation statute is state law. So is its slayer statute. And state law is precisely what the Employee Retirement Income Security Act and the Federal Employees’ Group Life Insurance Act are built to displace. The same divorce, the same forgotten beneficiary form, and the same $250,000 produce three different outcomes depending on who issued the policy.

So the first question in a beneficiary dispute is not who deserves the money. It is: what kind of policy is this? An individually purchased policy from an agent. A group life policy through an employer. A federal employee’s FEGLI coverage. Three regimes, and the analysis diverges at step one.

For the mechanics of how § 524.2-804 operates when it does apply — what it reaches, the 2025 expansion, and the Supreme Court’s Minnesota case upholding it — see our article on revocation by divorce. This piece is about the fight: which law governs, who decides, and how the money actually moves.

Which regime governs?

Why doesn’t Minnesota’s revocation statute apply to an employer plan?

Because the Supreme Court held that ERISA preempts exactly this kind of statute — in a case about a life insurance policy, a divorce, and an unchanged beneficiary form.

Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141 (2001) (No. 99-1529), arose from a Washington statute that automatically revoked a spousal beneficiary designation on a nonprobate asset upon divorce. David Egelhoff worked for Boeing, which provided a life insurance policy and a pension plan, both ERISA-governed. He named his wife. They divorced. He died about two months later without changing the designation. The $46,000 in life insurance was paid to the ex-wife; his children from a prior marriage sued under the Washington statute.

Justice Thomas, for the Court:

A Washington statute provides that the designation of a spouse as the beneficiary of a nonprobate asset is revoked automatically upon divorce. We are asked to decide whether the Employee Retirement Income Security Act of 1974 (ERISA)… preempts that statute to the extent it applies to ERISA plans. We hold that it does.

Id. at 143.

The mechanism is ERISA’s express preemption clause, 29 U.S.C. § 1144(a), which provides that ERISA’s provisions “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title.” At page 146, the Court quotes the operative clause in shorter form — “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” — and describes the remaining statutory scope, rather than quoting it, as “covered by ERISA.” Egelhoff, 532 U.S. at 146.

The Court acknowledged the obvious objection — that this is family law and probate law, “areas of traditional state regulation,” where a presumption against preemption applies — and answered that “that presumption can be overcome where, as here, Congress has made clear its desire for pre-emption.” Id. at 151.

The practical result: if the policy is an ERISA-governed employer plan, the ex-spouse named on the form gets the money, notwithstanding Minn. Stat. § 524.2-804.

Is every employer-provided policy an ERISA plan?

No — and this is the most valuable question to ask early, because the answer is not always obvious from the fact that the premium came out of a paycheck.

ERISA defines an “employee welfare benefit plan” at 29 U.S.C. § 1002(1) to mean, in relevant part, any plan, fund, or program established or maintained by an employer or employee organization “for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise… benefits in the event of sickness, accident, disability, death or unemployment,” among other things. Group life insurance provided by an employer generally fits.

But the Department of Labor has a safe harbor that takes certain voluntary programs out of the definition entirely. Under 29 C.F.R. § 2510.3-1(j), the terms “employee welfare benefit plan” and “welfare plan” do not include a group or group-type insurance program offered by an insurer to employees or members of an employee organization, under which all four of the following are true:

1. “No contributions are made by an employer or employee organization”;
2. “Participation the program is completely voluntary for employees or members”;
3. The sole functions of the employer are, “without endorsing the program,” to permit the insurer to publicize it, to collect premiums through payroll deductions or dues checkoffs, and to remit them to the insurer; and
4. The employer “receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.”

All four conditions must be satisfied. The one that most often fails is the third — employer endorsement. An employer that includes the coverage in its benefits handbook, brands it, negotiates its terms, handles claims paperwork, or presents it as an employee benefit rather than a third party’s product has generally endorsed it, and the safe harbor is gone.

This matters enormously. Voluntary supplemental life insurance that clears all four conditions is not an ERISA plan, which means Egelhoff does not apply, which means Minn. Stat. § 524.2-804 revokes the ex-spouse after all. The claim file should include the plan documents, the summary plan description, the enrollment materials, and the employer’s benefits communications, precisely so this can be evaluated rather than assumed.

What if the divorce decree says the ex-spouse gave up the policy?

For an ERISA plan, that is not enough by itself. The administrator pays according to the plan documents.

Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285 (2009) (No. 07-636), involved an ERISA savings and investment plan. William Kennedy named his wife Liv. They divorced, and the divorce decree contained a waiver of her interest — but it was not a qualified domestic relations order. He never changed the designation. He died. The estate argued the waiver controlled.

The Court held both halves against the intuitive answer:

We hold that such a waiver is not rendered invalid by the text of the antialienation provision, but that the plan administrator properly disregarded the waiver owing to its conflict with the designation made by the former husband in accordance with plan documents.

Id. at 288. The administrator “did its statutory ERISA duty by paying the benefits to Liv in conformity with the plan documents.” Id. at 299–300. And the Court explained why that rule is worth protecting:

Under the terms of the SIP Liv was William’s designated beneficiary. The plan provided an easy way for William to change the designation, but for whatever reason he did not. The plan provided a way to disclaim an interest in the SIP account, but Liv did not purport to follow it.

Id. at 303.

There are two lessons, one for the divorce lawyer and one for the beneficiary litigator.

For the divorce lawyer: a waiver clause in a decree does not change who gets paid. Either get a QDRO where one is available, or — far simpler and available in every case — make the client actually execute a new beneficiary designation through the plan’s own process, and confirm the plan received it. A decree provision that the client never implements is a malpractice exposure sitting in a drawer.

For the litigator: the question does not necessarily end when the plan pays. In footnote 10, the Court wrote: “Nor do we express any view as to whether the Estate could have brought an action in state or federal court against Liv to obtain the benefits after they were distributed.” Id. at 299 n.10. The Court set out the competing authorities on both sides and declined to resolve them. That reservation is the opening for a post-distribution claim against the recipient on a contract or constructive-trust theory — an argument that is genuinely available and genuinely unsettled, not a sure thing.

Does that post-payment argument work for a federal employee’s FEGLI policy?

No. That is the difference between the two federal regimes, and it is the sharpest line in this area.

Hillman v. Maretta, 569 U.S. 483 (2013) (No. 11-1221), concerned FEGLIA, which “establishes a life insurance program for federal employees” and provides that an employee may designate a beneficiary to receive the proceeds at death. 5 U.S.C. § 8705(a). Virginia had a two-part statute. Section A revoked a beneficiary designation on divorce. Section D was the backstop: if Section A was preempted, a former spouse who received a death benefit “not for value” that she was not entitled to under the statute “is personally liable for the amount of the payment to the person who would have been entitled to it” absent preemption. Hillman, 569 U.S. at 488.

Section D was drafted precisely to survive preemption — it does not touch the payment, only what happens afterward. The Court held it preempted anyway:

This case presents the question whether the remedy created by § 20-111.1(D) is pre-empted by FEGLIA and its implementing regulations. We hold that it is.

Id. at 486.

FEGLIA’s express preemption provision states that contract provisions relating to “the nature or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any law of any State… which relates to group life insurance to the extent that the law or regulation is inconsistent with the contractual provisions.” 5 U.S.C. § 8709(d)(1); id. at 488.

So for a federal employee’s FEGLI coverage, the designation on file with the Office of Personnel Management controls, and a state-law claim against the recipient after payment is preempted too. FEGLIA does provide one route: § 8705(e)(1)–(2) allows proceeds to be paid to another person to the extent expressly provided in a court decree of divorce, annulment, or legal separation or a related settlement — but only if the decree, order, or agreement is received by OPM or the employing agency before the employee’s death. Id. at 487. A decree filed after death does nothing. If a federal employee’s benefits are part of a dissolution, the decree has to be sent to OPM while the employee is alive, and the file should document that it was.

Does ERISA also preempt Minnesota’s slayer statute?

Unresolved — and the Supreme Court went out of its way to say so.

In Egelhoff, the respondents argued that if ERISA preempted the revocation statute, it must also preempt state statutes disqualifying a killer. The Court declined:

Those statutes are not before us, so we do not decide the issue. We note, however, that the principle underlying the statutes — which have been adopted by nearly every State — is well established in the law and has a long historical pedigree predating ERISA. And because the statutes are more or less uniform nationwide, their interference with the aims of ERISA is at least debatable.

Id. at 152. The Court cited Riggs v. Palmer, 115 N.Y. 506, 22 N.E. 188 (1889), the nineteenth-century case establishing the principle.

That is about as strong a signal as a reservation can carry without being a holding: the Court identified two features — historical pedigree and nationwide uniformity — that distinguish slayer statutes from revocation-on-divorce statutes and cut against preemption. But it is a signal, not a rule, and a plan administrator facing a slayer claim on an ERISA policy is in genuinely contested territory.

Minnesota’s slayer provision, Minn. Stat. § 524.2-803, has its own machinery for life insurance — an obligation to withhold on written notice at the insurer’s home office, a preponderance standard where there has been no conviction, and an emergency-order procedure where a complaint or indictment has issued. Those provisions are covered in our article on revocation by divorce and the slayer statute. What matters here is the threshold: on an ERISA-governed policy, whether they apply at all is an open federal question.

The Legislature already built in a preemption dodge

Worth noticing, because it shows the Minnesota statute was drafted with Egelhoff in view. Section 524.2-804, subd. 1, revokes designations “[e]xcept as provided by the express terms of a governing instrument… a court order, a contract relating to the division of the marital property made between individuals before or after their marriage, dissolution, or annulment, or a plan document governing a qualified or nonqualified retirement plan.”

The last carve-out means that where a retirement plan document governs, Minnesota’s revocation rule stands down by its own terms rather than being struck down. That reduces the number of head-on preemption fights, but note its limits: it is written in terms of retirement plan documents. It is not a general exemption for every ERISA welfare benefit plan, and it does not resolve the status of an employer group life policy — for which Egelhoff supplies the answer directly.

How does the money actually move when two people claim it?

Usually through interpleader. The insurer does not want to pick, and it does not have to.

Federal statutory interpleader, 28 U.S.C. § 1335, gives district courts original jurisdiction over an interpleader action filed by any person or entity holding money or property worth $500 or more, or that has issued a policy of insurance of that amount, if two or more adverse claimants “of diverse citizenship as defined in subsection (a) or (d) of section 1332” are claiming or may claim entitlement, and the plaintiff has deposited the money into the registry of the court or given bond. Two features make this the insurer’s preferred route: the diversity requirement is minimal — diversity between two adverse claimants, not complete diversity — and the $500 threshold is trivially met by any real policy. Section 1335(b) adds that the action may proceed “although the titles or claims of the conflicting claimants do not have a common origin, or are not identical, but are adverse to and independent of one another.”

Rule interpleader, Fed. R. Civ. P. 22, is the alternative where the § 1335 requirements are not met. Rule 22(a)(1) permits joinder of “[p]ersons with claims that may expose a plaintiff to double or multiple liability,” and Rule 22(b) provides that the rule “supplements—and does not limit” Rule 20 joinder, and that its remedy “is in addition to—and does not supersede or limit—the remedy provided by 28 U.S.C. §§ 1335, 1397, and 2361.” Rule 22 supplies no independent jurisdiction, so an ordinary basis — including ERISA itself for a plan benefit — has to exist.

State interpleader, Minn. R. Civ. P. 22, is available where the dispute is purely a matter of state law. The rule allows claimants to be joined “when their claims are such that the plaintiff is or may be exposed to multiple liability,” and contains the provision that matters most to a stakeholder: a defendant who admits liability may, “upon paying the amount claimed or delivering the property claimed or its value into court or to such person as the court may direct,” move to substitute the claimants in its stead, and “[o]n compliance with the terms of such order, the defendant shall be discharged and the action shall proceed against the substituted defendants.”

For a claimant, the strategic consequences of interpleader are worth understanding before it happens. Under both the federal statute and Minn. R. Civ. P. 22, the stakeholder pays the money in and is discharged — so the insurer deposits the funds and leaves, and the fight becomes claimant-versus-claimant with no deep pocket in the room. The money is frozen for the duration of the case. Whether the stakeholder can also recover its fees and costs out of the deposited fund is a question to check in the specific forum before assuming the fund will arrive intact; it is not addressed by the text of § 1335 or Rule 22. All of which is an argument for resolving a two-claimant dispute by agreement before anyone files.

What determines whether the insurer pays or waits?

Written notice, delivered to the right place, before the check goes out. This is the single most time-sensitive thing a claimant’s lawyer does.

Minnesota’s revocation statute protects a payor that acts “in good faith reliance on the validity of the governing instrument, before the payor or other third party received written notice,” and makes the payor “liable for a payment made or other action taken after the payor or other third party received written notice of a claimed forfeiture or revocation under this section.” Minn. Stat. § 524.2-804, subd. 5(a). The notice “must be delivered to the payor’s or other third party’s main office or home.” Subd. 5(b). The slayer statute has a parallel structure keyed to written notice at the insurer’s home office. § 524.2-803(d), (g).

The operative rule for practice is simple and unforgiving: until written notice arrives at the right address, the insurer can pay the named beneficiary and be discharged. Once it arrives, the insurer is exposed if it pays anyway — which is exactly what converts a stakeholder into an interpleader plaintiff. Notice is not a courtesy; it is the act that creates the leverage.

Note also that these safe-harbor provisions are themselves state law. On an ERISA-governed plan, their application is subject to the same preemption analysis as the revocation rule they serve.

What to do in the first week

• Identify the policy type before anything else. Individually purchased, employer group, or federal. Get the actual policy or plan document, the summary plan description, and the enrollment and employer communications — not just the claim form.
• If it is employer-provided, test the safe harbor. Run all four conditions of 29 C.F.R. § 2510.3-1(j). Employer endorsement is where it usually fails, and if it fails, ERISA applies and Minnesota law does not.
• Send written notice immediately to the insurer’s main office or home office, describing the claimed revocation or forfeiture. Send it in a way that proves delivery and date.
• Pull the divorce decree and check what was actually done. A waiver clause is not a beneficiary change. For FEGLI, confirm whether the decree reached OPM before death.
• Preserve the post-distribution theory if the money is already gone. Kennedy left it open for ERISA. Hillman forecloses it for FEGLI.
• Consider whether other nonprobate assets are exposed to the same problem. Payable-on-death accounts and joint accounts follow their own rules — see our guide to POD and joint accounts — and a client who forgot one beneficiary form usually forgot several.
• Check whether the estate has competing claims. A surviving spouse’s elective share and the omitted spouse and omitted children provisions can reach assets that a beneficiary designation appeared to settle.

Madgett Law, LLC represents claimants and estates in Minnesota life insurance and retirement beneficiary disputes — including ERISA and FEGLIA preemption analysis, interpleader actions in state and federal court, revocation-on-divorce and slayer-statute claims, and post-distribution claims against a recipient. We also advise family law counsel on making a decree’s beneficiary provisions actually stick. If a death benefit is in dispute, the notice letter is time-sensitive. Call 612-470-6529 or send us a message.

Sources: Minn. Stat. § 524.2-804, subd. 1 (revocation on dissolution; carve-outs including “a plan document governing a qualified or nonqualified retirement plan”), subd. 5(a)–(b) (payor protection before written notice; liability after; delivery to main office or home), https://www.revisor.mn.gov/statutes/cite/524.2-804. Minn. Stat. § 524.2-803(d) (insurer must withhold on written notice at its home office), (g) (obligor not liable absent prior written notice at home office or principal address), https://www.revisor.mn.gov/statutes/cite/524.2-803. Minn. R. Civ. P. 22 (state interpleader; discharge of a defendant on payment into court), https://www.revisor.mn.gov/court_rules/cp/id/22/. 29 U.S.C. § 1002(1) (definition of “employee welfare benefit plan”), https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title29-section1002&num=0&edition=prelim. 29 U.S.C. § 1144(a) (ERISA express preemption), https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title29-section1144&num=0&edition=prelim. 29 C.F.R. § 2510.3-1(j)(1)–(4) (four-condition safe harbor excluding certain voluntary group insurance programs from “employee welfare benefit plan”), https://www.ecfr.gov/current/title-29/section-2510.3-1. 28 U.S.C. § 1335(a)–(b) (federal statutory interpleader; $500 threshold; minimal diversity; deposit or bond), https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title28-section1335&num=0&edition=prelim. Fed. R. Civ. P. 22(a)(1), (b) (rule interpleader; relation to Rule 20 and to 28 U.S.C. §§ 1335, 1397, 2361), https://www.law.cornell.edu/rules/frcp/rule_22. Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141 (2001) (No. 99-1529, decided Mar. 21, 2001), at 143 (“We hold that it does”), 146 (Court’s shorter-form quotation of § 1144(a), glossing the remainder as “covered by ERISA”; the full statutory text quoted in the body is confirmed independently against 29 U.S.C. § 1144(a) at uscode.house.gov, not against this page), 151 (presumption against preemption overcome), 152 (slayer statutes “not before us”; interference “at least debatable”; citing Riggs v. Palmer), https://static.case.law/us/532/cases/0141-01.json. Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285 (2009) (No. 07-636, decided Jan. 26, 2009), at 288 (holding), 299–300 (administrator’s ERISA duty), 299 n.10 (no view on a post-distribution action against the recipient), 303 (wisdom of the plan documents rule), https://static.case.law/us/555/cases/0285-01.json. Hillman v. Maretta, 569 U.S. 483 (2013) (No. 11-1221, decided June 3, 2013), at 486 (“We hold that it is”), 487 (5 U.S.C. § 8705(e) decree must be received before the employee’s death), 488 (Virginia Section D text; 5 U.S.C. § 8709(d)(1) preemption clause), https://static.case.law/us/569/cases/0483-01.json.

This article is general legal information about Minnesota and federal law. It is not legal advice, it does not create an attorney–client relationship, and it does not promise or imply any particular outcome. Statutes, regulations, and case law change; verify current authority before acting. If you have a specific situation, consult a lawyer.