SGLI Military Spouse Beneficiary & Divorce
A Service Member Waives the Right to Change the SGLI Beneficiary – What Happens Next?
Colorado Case of Kathleen Mills v THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, (corporation), and STEPHEN MILLS (service member’s brother; life insurance beneficiary)
Quick Facts
- Spouse: Kathleen Mills (Mrs. Herbert Roger Mills)
- Service Member: Major H. Roger Mills, U.S. Army
- Married: in the state of Ohio
- August 2005: Service member files for divorce in the Court of Common Pleas in Ashtabula County, and requests and receives a state court granted motion to place both the service member and spouse under a restraining order to make no changes to “any life insurance or medical insurance policy either owned by either or in which they have an interest.”
- February 2009: Service member changed his Servicemembers Group Life Insurance (SGLI) beneficiary (held with Prudential) from his spouse, Kathleen Mills, to his brother, Stephen Mills and did not notify his spouse.
- October 2010: Service member passed away in a military training accident
- Divorce: Never finalized due to service members death
- Life Insurance Proceeds: Paid to Stephen Mills of Colorado Springs, CO
Issue: Kathleen Mills claims rights to the proceeds paid to the service members brother, Stephen Mills due to her late husband, Major H. Roger Mills, violating the restraining order (his action to change the beneficiary). She claimed that the change of beneficiary should be null and void because the service member waived his right to change the beneficiary (by entering the restraining order).
Conclusion: Dismissed. Kathleen Mills has no claim to the life insurance proceeds, despite the violation of the state court order.
The case of questionable beneficiary took place in Colorado, the state of residence of the service member’s brother, Stephen Mills. The court held that federal law trumps state law and federal law recognizes the service member’s “absolute right” to change a beneficiary at any time. It also held that the failure to notify a spouse of the change, does not make the policy invalid; the right to change still prevails. (Sources: Mar. 14, 2013 No. 12-1208 (D.C. No. 1:11-CV-02127-DME-CBS) (D. Colo.) here and April 17, 2012 Civil Action No. 11-cv-02127-DME-CBS here. )
Discussion:
Kathleen Mills faced two challenges:
- Under federal law, the service member has an absolute right to designate the beneficiary of the SGLI policy.
- This life insurance is not treated like community property and in fact, cannot be seized for legal or equitable process. When Congress enacted SGLIA in 1965, it declared the proceeds are exempt from taxation and claims from creditors seeking debt repayments.
First issue: Federal law prevails over state law. Ohio had no stance to approve a motion to waive SGLI in the first place. In most cases, when two parties agree to something, it becomes a binding contract. However, two people cannot enter a contract that is in itself—illegal. The restraining order would have been upheld for personal life insurance policies, but not SGLI.
Second issue: This deals with protecting the intentions of the restraining order, in essence—an equitable agreement. When the spouse and service member were placed under this order, the understanding was that Kathleen Mills would remain the beneficiary. Clearly, and injustice has been done. But to whom does Kathleen Mills address her claim? Kathleen Mills has in a sense become a ‘creditor’ seeking payment and as such will have no claim under federal law. Her claim would fall to state level, a claim against the estate of the deceased Major H. Roger Mills (excluding of course, all life insurance proceeds).
Since the case was against Prudential Insurance Company of America and Stephen Mills, we can see why it was ultimately dismissed. There is no claim to be upheld against either party. Prudential Insurance Company has done nothing wrong. They paid the beneficiary designated by federal law. The beneficiary has done nothing wrong. He received the money due him per the policy.
What’s to be Done to Protect the Military Spouse?
Attorney Joseph M. Lyon sums up the predicament nicely:
“The current SGLIA legislation therefore, fails on two fronts. First, the language is not specific on waiver. Conduct described above should not be validated or allowed. It isn’t good policy for state or federal, nor is it becoming of a military officer to seek a remedy in a state court while blatantly ignoring the order, to his spouse’s financial detriment. yet, under our current law, a serviceman can file legal paperwork and protect himself from his wife changing him as a beneficiary, but she is not offered the same protection under the law. Second, the failure to notify does not result in the policy being void. A breach of this duty should have legal consequences, but as it stands, there is no recourse.” (See source)
Kathleen Mills has written a letter to President Obama with a proposal for a Military Spouse Protection Act . This should not be confused with Uniformed Services Former Spouses’ Protection Act (USFSPA). The Military Spouse Protection Act would permit a military spouse to own an equal amount of SGLI Insurance on the service member at the same premium rate. Mrs. Mills is a Gold Star widow, worked as an educator for the Department of Defense, raised two officers, and has six military grandchildren. She acts as a National Military Spouse Advocate, helping abandoned American military spouses. (See article by Paula Carrasquillo of Communities Digital News reported on Feb. 21, 2014)
Financial Uncertainty – What Military Spouses Need to Know
- Every current military spouse and former military spouse should be aware that they are not protected by SGLI in any sense. The service member (per U.S. Supreme Court decision Ridgway v. Ridgway, 454 U.S. 46, 102 S. Ct. 49 (1981)) has an “absolute right” to change this beneficiary at any time. In addition, no federal cases have been noted where a service member has waived the right to designate a beneficiary.
- If you are a divorced service member or former military spouse with language in your decree discussing SGLI, you might want to review it and discuss any questions you might have with your lawyer.
- While we await news of the proposed military spouse SGLI, one way to protect the military spouse from these perils would be to negotiate for the spouse to own a private life insurance policy on the service member. The service member might need to complete medical tests, and the parties would also need to negotiate who should pay the premiums on this policy.
Dear M T Lott,
You are entitled to your opinions, however I challenge your ability to question my ability to determine that I misunderstood anything on my part with regards to USFSPA Killer.
I believe I gave a valid answer to a sneering question.
Regarding your American History lesson to me, I am aware that Congressman Cummings is a Member of the HR. If I created confusion in how I used my words, I stand corrected.
Congressman Cummings in fact will be taking this to the Senate Committees which are deemed appropriate to raise awareness, and garner support.
I did not mean to convey that he was a member of the Senate.
I also appreciate your attempt at empathy in stating “everyone feels your pain”, however once more you stand corrected as someone who speaks for “everybody”.
That statement I find to be dismissive when used with communication and untrue.
Please believe me when I tell you, I am not in pain. Just because I am an Advocate on behalf of Military Spouses does not mean I am in pain. I can be passionate, determined, insulted, undeterred, however I am not in pain…that ship has sailed.
I lived a blessed life, and believe that God does not call the qualified , He qualifies the called. What I went through personally and professionally qualifies me to advocate for those who currently are in emotional pain and have lost their voice.
In addition your last statement shows it is truly you that misunderstands the issues I represent.
“Wishing you the best in your efforts to assist those military spouses whose marriages remain in tact “until death do they part”.”
I am an advocate for the Abandoned American Military Spouse. A spouse who is trapped between being married, yet being denied their military benefits. My efforts if successful will benefit all spouses from simply being discarded without the benefit of legal adjudication.
You can find more on this by going to the DoD website http://www.militaryonesource.mil. There you will find an explanation on this matter.
You can do more than wish me the best if you feel…
“there is a true need for companion legislation in both entities of Congress which will assist in combining the agreed legalese before sending it for the President’s signature.”…you can get involved.
Thank you for taking he time to write.
Kathleen Mills
Just a second – military spouses don’t earn any military benefits – military benefits are a privilidge granted through the military member’s contractual service to the government. Military spouses do not have any legal contractural releationship with the government. Military spouses can and have had their military benefits – i.e. privilidges – revoked for cause. Military spouses may keep these benefits while they are legally married to a military member, but once that marriage ends in divorce, the military spouses benefits also must end by law.
Dear M T Lott,
I do not believe I expresed that military spouses “earn any military benefits”.
Upon divorce certain spouses retain benefits,such as health care due to the 20/20/20 rule,and other such benefits that do not end just because the marriage ended.
Again thank you for your response.
Kathleen Mills
Brenda,
I am going to encourage you to re-read this article. In fact it is written to protect the current spouse, as opposed to the former spouse.
There are always challenges with blended families, and based on your comments you feel that the former spouse is “always trying to cause problems”. As in all of life’s situations that is unique to the people involved.
My Military Spouse Protection Act is written based on the orders of the JCMJ, Family and Paternity Regulations, and Congressional Law. The issues arise for the military spouse when they they are not enforced, or they are ignored.
Ironically you also are a military spouse, and hopefully after many years of marriage, deployments and the hope for a happily ever after, that doesn’t become you on the curb.
Kathleen,
Did the President ever answer your letter request to enact a “Military Spouse Protection Act” ?
Dear USFSPA Killer,
Please allow me to share what an Open Letter is intended for.
An open letter is a letter that is intended to be read by a wide audience, or a letter intended for an individual, but that is nonetheless widely distributed intentionally.
Open letters usually take the form of a letter addressed to an individual but provided to the public through newspapers and other media, such as a letter to the editor or blog. Especially common are critical open letters addressed to political leaders.
There are a number of reasons why an individual would choose the form of an open letter, including the following reasons:
As a last resort to ask the public to judge the letter’s recipient or others involved, often but not always, in a critical light.
To state the author’s position on a particular issue
.
As an attempt to start or end a wider dialogue around an issue.
As an attempt to focus broad attention on the letter’s recipient, prompting them to some action.
For humor value
Simply to make public a communication that must take place as a letter for reasons of formality.
Many of the epistles of the Bible (such as the Pauline epistles) are open letters.
Bill Gates’s Open Letter to Hobbyists (1976) attacking copyright infringement in software development.
As you appear interested in The Military Spouse Protection Act, it is with much excitement that I inform you that last week I met with Congressman Elijah Cummings and others.
Congressman Cummings has taken my proposals and is currently drafting them into the appropriate legalese in order to help the Senate understand the need for such an Act.
I could feel your sneer toward me with your question however I would expect as much from someone who cannot use their real name when communicating in this type of “hit and run” communication.
Kathleen Mills
” what we do in life echo’s in eternity”
General Maximus Decimus
Gladiator
Kathleen –
Your perception that “USFSPA Killer” was sneering at you is a misunderstanding on your part. Whoever “USFSPA Killer” is, they asked you a valid question and deserved a valid answer. Everyone feels your pain of what your late husband did before his tragic death. HE “sneered” at a Court order, even one with which HE had input.
Let me clear up a possible confusion about your statement, ” Congressman Cummings has taken my proposals and is currently drafting them into the appropriate legalese in order to help the Senate understand the need for such an Act.” Congressman Cummings is a Member of the House of Representatives, one of the two entites of the federal Legislature. The other entity is the Senate. Congressman Cummings isn’t a member of the Senate. Yes, there is a true need for companion legislation in both entites of Congress which will assist in combining the agreed legalese before sending it for the President’s signature.
Wishing you the best in your efforts to assist those military spouses whose marriages remain in tact “until death do they part”.
Brenda –
You need to calm down and stop spewing your vitriolic jiberish !
Well guess what a former x wife can hurt the current wife by she is not married not married to her xhusand. Always looking to cause trouble for the couple. Please if xspouse remarried. You have none thing to say. You x military wifes want to control xspouse to get what you want. Guess what you are a civilian just like others been kick to the curb, replace cause of your bad behavior. Your xspouse never wants to see you and the kids. You are on your own now a CIVILIAN
This is the BULLCRAP that the family law industry puts out as “pity party” to have the general public believe ! The USFSPA commits FRAUD against every military retiree ! Military retired pay is the SOLE ENTITLEMENT of the military retiree and never has any “community property” likeness – read McCarty vs. McCarty, 26 June 1981 !
Spouses dedicate their lives to the military and sacrifice their own careers to support the mission. Honorable military members dedicate their lives to their families, their country, and the branch of military, in which they serve. A dishonorable military member, who commits fraud against their military spouse, will more than likely commit fraud against anyone including the military and the USA, as we have seen in the news of late! My honorable military friends support the protection of military spouses and former spouses who have have served beside their military member and when some have divorced, they took care of their former spouse and family. It is about honor in serving in the military and in the family!
In repley to above comments…in fact my insurance policy was kept with my husband as benificary until 8 months after his death. The photo was not my choice. Federal demands the spouse be notified if the service member changes the benificary. That did not happen. This is a case of a sevicemember lying to a court,manipulating the law,and in fact being enabled to do so. He dishonored the uniform of all sevicemembers that obeyed the law. Kathleen Mills
Kathy –
Did your letter to Pres. O receive the respect of an answer back to you on your proposal for a Military Spouse Protection Act ?
Again, another kangaroo court trying to “Hop” ( lol ! ) above federal law.
Good judgment. The Federal Law demands the service member designate whomever he/she wishes to be the beneficiary of HIS or HER life insurance policy. Was her policy written with the serviceman as beneficiary? I’m doubting it. Another example of an entitled dependabpotomus.
…and the graphic used for the article (implies that the ex-spouse is really excited to get the insurance check after her ex-husband serviceman is killed) is highly offensive to this x2 combat vet.
The only company that will insure an active duty soldier is USAA-very costly. Congress has passed a law requiring spousal notification if there is a change in beneficiary, however I was never notified.
I am suggesting that if the soldier is able to purchase SGLI-family life insurance on his spouse; then the spouse should be able to purchase SGLI insurance on her husband.
Kathleen Mills
Most enacted laws have built-in personal protection for the government employees who administer the law’s provisions and benefits, as long as they follow the law. Attempting to file claim against the “Secretary(ies) concerned” for failure to notify might be a fruitless effort as the law’s wording provided a fall-back plan.
Question? what fall back wording…at no time does the law excuse the “Secretary(ies). It says if spouse is not notified that does not change the selection. What that means is in the event the spouse moves and the letter of notification is returned(ie spouse address is not current ,then the beneficiary change is valid). It does not let the “secretary ” off the hook from not following the law.
Kathleen, Your proposal of an additional policy (where the spouse would have control of the listed beneficiary) is a great idea. Please keep us posted on the progress of your suggestion.
And neither were those same “social engineers” thinking that the USFSPA would ever be created !
There is no way that any person, even the service member, can “own” an SGLI Life Insurance policy, as the federal government “owns” the policy as the federal gov’t pays the premiums. An acceptible and legal way around this is to have the military member purchase a commercial term life insurance policy with the spouse/former spouse as the beneficiary. Commericial term life insurance is a better buy than SBP and provides more coverage for lesser cost.
I wouldn’t focus so much on the use of the word “own,” but rather Mrs. Mills’ suggestion for a Military Spouse Protection Act to provide an additional SGLI policy on the service member, where the spouse would have control of the beneficiary. It’s not who owns the policy, but who has the power to designate the beneficiary.
Why was SGLI established if not to protect the immediate family? Since the premiums don’t come out of the service member’s pocket, maybe the founders of SGLI should have given control to the spouse when they established the law? They probably weren’t thinking a service member would intentionally leave his immediate military family with nothing.
(The value of commercial life insurance over SBP is debatable, and a topic for another article)
Please research the financials of both commercial life insurance and SBP – i.e. cost vs. benefit (pay-out) and post them as “another article”.
We will add this to our list of suggested topics. For those looking for immediate answers, this is covered in great detail in the book Military Divorce Tips.
This is one more case where the non-military spouse needs to educate him/herself. Her attorney failed her in getting, through discovery if necessary, a copy of the current beneficiary listing for the SGLI. Unfortunately, there are many ignorant attorneys out there when it comes to the financial aspects of divorce. In their defense, that is not their specialty. They will include paragraphs in a divorce decree that pertain to the IRS/taxes, and the IRS does NOT care what is in your divorce decree. The IRS has his own laws and could care less what your state says, too. This is precisely why people need to make sure that a financial expert and CPA/tax attorney are involved. Do NOT rely on an attorney for information that is not their specialty. Always verify everything. For the record, I have always known that the service member has total control over the SGLI, regardless of what an attorney said.
I agree that experienced attorneys and education on military divorce matters are important.
I’m not sure we can fault her attorney though because the service member changed the SGLI four years after the state issued the court order to make no changes. One can assume discovery was done, and at that time the spouse was indicated as the beneficiary (thus the need for an order not to make any change).
On a federal level, there is a requirement to notify the current spouse of any beneficiary change (which of course he didn’t do), but the Colorado case ruled that “failure to notify” doesn’t negate the legality of the change and corresponding payout.
All military couples should understand these rules, especially the military spouses. It’s an interesting proposal to permit the spouse to own a SGLI plan on the service member.
He did N-O-T violate a court order – !
In the Court Order generalities, his SGLI was included.
He made NO changes to any other life insurance.
As Mrs. Mills complaint states, “He found a loophole in the law and used it.” (sic)
By FEDERAL LAW the order did NOT pertain to his SGLI !
Sorry, federal law TRUMPS state law and court case law on this one ! ! !
His attorney should have voiced that exemption at the hearing for the restraining cross-order.
This action begs the question, “Did Major Mills’ attorney fail in his legal duty to protect his client from making illegal agreements?” Only Major Mills’ untimely and unexpected death led to the eventual dismissal of Mrs. Mills’ lawsuit. Even if Major Mills remained alive, he could have beat a Contempt charge based on federal law.
Life insurance is normally purchased to protect and assist your immediate family. He purposely left her (his legal wife) with a big surprise and violated a state court order. Not very honorable.