The issue in Angell was whether federal law preempts a district court‘s award of death benefits to a non-beneficiary spouse. The Court held that Federal anti-attachment provisions preempt a district court‘s order apportioning $150,000 in federal death benefits to a non-beneficiary spouse under Minn. Stat. § 518.58, subd. 2 (2008) in a marriage dissolution.

The parties were married in 1981. One of their sons, Levi, enlisted in the Marines in 2002. He died during combat operations in Iraq in 2004. Prior to his death, Levi secured life insurance coverage through the Service members Group Life Insurance (SGLI) program. SGLI is regulated under federal law. Levi named his mother, alone, the beneficiary under the policy. She received approximately $500,000 following Levi's death.

Two years later, a dissolution action was commenced. The case required a trial, but the only issue involved the characterization of the SGLI benefit as "marital" or "non-marital."

While the district court found the SGLI benefits were non-marital in favor of Wife, Husband was awarded a share of the proceeds to prevent "unfair hardship," as permitted by state statute. Wife appealed, alleging that the SGLI benefit was under the "exclusive jurisdiction of the federal government."

The Minnesota Court of Appeals found that the district court‘s order awarding appellant a share of the federal death benefits directly conflicted with the express prohibition under federal law barring the diversion of military death benefits from designated beneficiaries of those benefits.

The Minnesota Supreme Court accepted review. In affirming, Justice Gildea opined that "Under the Supremacy Clause of the U.S. Constitution, a federal law prevails over a conflicting state law."

She noted:

A state law conflicts with a federal law when it is impossible for a private party to comply with both state and federal requirements or when the state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.

Justice Gildea ultimately concluded that:

The district court‘s award of a portion of the federal death benefits to appellant interferes with the congressional objective expressed in the federal anti-attachment statutes. In these statutes, Congress made clear through the exemption of the federal death benefits from any legal or equitable process whatever that these benefits belong only to the beneficiary.

Despite the inequities that may exist for father, the outcome in this case appears to be appropriate. There really isn't any question about the nature of the benefit as non-marital (even the district court agreed), but the dispute in this case really came down to "equity" under state law against the trumping nature of an unassignable benefit under federal law. Federal law always wins.

One has to wonder whether Levi would appreciate the outcome in this case. At the time he executed the SGLI paperwork, he named only his mother beneficiary. But, that was several years before his parents separated. Did he really want only his mother to realize the proceeds from the policy? Or, did he think she would, logically, share the proceeds with his father? Was mom the better money manager? Many things to speculate about.

Perhaps if the form itself explained to the insured the consequence of naming one parent as sole beneficiary in the event of divorce, he would have listed both parents. Then again, maybe he wouldn't have. Either way, important for anyone obtaining life insurance (in particular, through the SGLI) to knowingly name (or preclude) certain individuals from benefiting from the policy in the event of a divorce.

In Angell, former husband and wife in a marriage dissolution proceeding respectively challenged the district court's classification and division of death benefits paid after their son died during active military duty. The son had named only his mother as the beneficiary of his military life-insurance policy, which, by federal law, also made her his beneficiary in a federal death-gratuity program available to active-duty service members.

The district court classified these funds as Loretta Angell's exclusive nonmarital property but awarded Gordon Angell a share to prevent an unfair hardship.

Loretta Angell argued that this award violated federal anti-attachment statutes protecting military death benefits.

Gordon Angell filed a notice of review challenging the district court's property classification. He argued that the district court should have classified the life-insurance and death-gratuity benefits as marital property because Loretta Angell did not acquire them as a gift, bequest, devise, or inheritance and because she did not overcome the presumption that property accumulated during marriage is marital property.

Judge Ross concluded that the district court properly classified the life-insurance and death-gratuity benefits as Loretta Angell's nonmarital property, and affirmed the district court‟s classification. But, the Court of Appeals also opined that federal law prohibits the district court from relying on state law to divide the benefits between the parties.

This appears to be an issue of first impression in Minnesota. Interesting, too, that a conflict of laws issue between state and federal statutes found its way into family court. For these reasons, it appears the Minnesota Supreme Court wishes to weigh in. We'll keep you posted.

Marital property is usually divided equally while non-marital property is allocated entirely to the party who maintains the non-marital interest. Non-marital property involves the interest a party has in property accumulated prior to a marriage or property received as a gift or inheritence by one spouse, individually, during a marriage. Marital property involves any property that the parties accumulate during their marriage, including home equity, retirement assets, business interests, bank accounts, investments, motor vehicles and other property of value.

In order to ascertain the value of property, experts are typically retained. These include real estate appraisers, actuaries, business valuators and other individuals with specialized knowledge in determining the market value of various assets.  These experts can be retained by one or both of the parties.

Once all property interests are valued, a balance sheet is put together to reflect the allocation each party will receive.  Naturally, one party will receive more property than the other as items are divided.  When this occurs, a cash payment (equalization) is typically made from the spouse receiving more property to the spouse receiving less property in order to equalize the cumulative value of the assets they receive as a result of the dissolution of marriage.

Debts are typically treated the same way as assets.  Quite often, the court will allocate all debts incurred during the marriage equally.  Debts that remain from a time preceding the marriage are typically allocated to the party incurring the debt.  The same is true for debts incurred post-separation. The value of a particular debt is usually verified through a recent statement. Typically, if the party is allocated an asset they will take any debt that accompanies it.  A prime example involves an automobile.  If one spouse takes a car, they will likely have to accept responsibility for the debt associated with it.