Wednesday, June 22, 2022

Can A Life Insurance Beneficiary Be Changed After Death

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Can A Beneficiary Be Removed From A Life Insurance Policy

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During their lifetime, the policyholder can usually change or remove a life insurance beneficiary. However, those wishing to make such a change should be aware of potential complications:

  • Beneficiaries must be changed by following the correct procedures with the insurance company. Beneficiaries usually can’t be changed through other means, like a last will and testament.
  • Changes made shortly before death or while the insured is physically or mentally incapacitated are more likely to be contested.
  • Removal of a beneficiary shouldn’t violate a court order, such as a divorce decree.

Aside from the policyholder, only a court can remove a beneficiary from a life insurance policy. A court may only do this under limited circumstances that depend on the terms of the life insurance policy and any applicable state or federal laws.

Rule : A Spouse Can Contest Being Excluded When Their Spouse Isnt Mentally Competent When Naming A Beneficiary

It sounds like a plot out of a movie, but family members have been known to take advantage of a senile parent and get them to change the beneficiary of their life insurance policy.

If this is the case, a person could argue that their spouse wasnt mentally competent when they made the change, leaving it up to a judge to decide the suit’s outcome.

For example: John is 88 years old and has recently been diagnosed with Alzheimers disease. The majority of the time, he is lucid and carries on conversations like he always has. However, sometimes he gets forgetful about peoples names and where he is.

John owns a life insurance policy and has named his wife Mary as the beneficiary. Their son David has John change the beneficiary to be David, without Marys knowledge. When John passes away, and David lays claim to the death benefit, Mary could contest this and show that the date John signed the change of beneficiary form was after he had been diagnosed with Alzheimers disease. Its quite likely that Mary would prevail since John was not in possession of 100% of his faculties when he signed the change of beneficiary form.

Is Contesting A Life Insurance Beneficiary Legal

Generally speaking, yes. If someone else believes that the policyholders choice of beneficiary should not be honored then they can raise a claim to dispute it. This, however, can be a lengthy and time-consuming process that involves hiring an attorney and contesting the beneficiary in court. Only a court decision can change who can benefit from a life insurance policy the insurer is required to abide by the terms of the original contract.

So who can contest a life insurance beneficiary?

In simple terms, anyone who believes they have a valid claim to a life insurance policy can contest the original policyholders choice of beneficiary. Some examples of when a life insurance beneficiary may be contested include:

  • A current spouse who objects to a former spouse being named as the life insurance policys beneficiary
  • Adult children who believe they should be named beneficiaries to a parents policy
  • Anyone who believes the original beneficiary designation was made under duress or undue influence

Its not uncommon for disputes over life insurance beneficiaries to arise after someone makes changes to their policy after a major life change. So for example, if you get divorced and remarry youd have to update your policy to make your new spouse the beneficiary. Otherwise, your former spouse would still be entitled to the policys death benefit when you pass away.

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Rule : In A Community Property State How Long A Couple Is Married Determines The Death Benefit Payout To The Former Spouse

It gets more complicated in a community property state. Using the example above, lets say Peter and Ruth lived in Washington, a community property state. They were married for five years and had no children. Peter took out a $100,000 life insurance policy and named Ruth as the beneficiary. They got divorced after five years, and Peter was then married to Paula for five years. Peter changed his policy beneficiary to Paula when they got married.

Peter then passed away. Because Washington is a community property state, Ruth would claim 50% of the death benefit because she was married to Peter half of the time he had the life insurance policy, and the premiums were paid with community money. Paula would be paid the other 50% because she was named as the beneficiary of the policy.

Common Times People Dispute Life Insurance Beneficiaries

Can I Change My Beneficiary After I Retire?

Many people purchase life insurance when they are in the early or middle stages of their adult lives, which is the time when most people are getting married and having children. They typically list their children and spouse as beneficiaries. As they move through life, their life circumstances may change. A beneficiary may become estranged, or the couple may face divorce.

Unless the policyholder of the life insurance plan changes the beneficiary designation officially, the people originally named will remain the beneficiaries through the life of the policy. Even if the policyholder was not on speaking terms with the individual upon his or her death, that beneficiary would still receive the income.

Disputes can also come up when the policyholder makes changes to the policy near the end of life, and the new beneficiaries are unexpected. Sometimes the previous beneficiaries may feel that their loved one was coerced into these changes or was not in sound mind at the time the changes are made. This, too, can spark a desire to dispute the beneficiaries.

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Reduce The Chances Of Someone Contesting A Life Insurance Beneficiary

To reduce the chance of a beneficiary contest after their death, a policyholder may wish to take precautions, including:

  • Updating beneficiaries after major life events or document that a lack of change was intentional
  • Following insurance company procedures when changing beneficiaries
  • Involving witnesses in beneficiary changes that may be controversial like replacing an adult child with a new spouse

After the policyholder’s death, opportunities to change a beneficiary or prevent a contest are minimal. People involved in these situations may wish to seek the advice of an attorney.

If you’re looking for life insurance coverage or simply want to learn more about your options, you can get a free plan quote online that allows you to compare different insurance plans from different companies. Or you can call to speak with a licensed insurance agent who can help you compare plans available where you live.

Why Updating Your Life Insurance Beneficiaries Matters

Keeping your policyâs beneficiaries updated ensures that your death benefit goes to the right people. Itâs always smart to review your policy regularly, but you should consider adjusting your coverage after any big life event, such as:

  • Birth or adoption of a child

  • Death of a beneficiary

  • Buying a home

If you never change your beneficiary and they predecease you,your life insurance proceeds will pay out to a contingent beneficiary or your estate. Once the payout becomes part of your estate, a court decides who gets the funds. The proceedings can be expensive and lengthy for your family.

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Per Stirpes Versus Per Capita Distribution

With respect to a beneficiary designation, the per capita distribution method commonly means that your death benefit will be distributed equally among your beneficiaries. In contrast, the per stirpes method of distribution is based on a generational approach. If a beneficiary precedes you in death, then the benefits would pass on to that persons children in equal parts. Generally, spouses are not part of a per stirpes distribution.

In the per stirpes method of distribution, if your child were to pass away before you, your other children would receive half of the benefits, and the children of the deceased would be entitled to the other half.

Payouts Dont Happen Automatically

Life Insurance Beneficiary Information

Beneficiaries typically need to alert the life insurance company to the insureds death by filing a claim. If you have the policy documents, they will tell you everything you need to know about the coverage and how to file a claim. But even if you dont have all the paperwork, as long as you know you are a beneficiary you should be able to begin the claims process if you have these three things:

  • The name of the insurance company
  • The policy number
  • The insureds death certificate

While every companys process varies somewhat, youll basically have to fill out a claims form called a Request for Benefits and provide a copy of the death certificate. If you are in touch with the insureds insurance agent, they can help you through the claims process. Otherwise, go to a search engine and enter, File death benefit claim – for the contact information you need to start.

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Considerations For Establishing A Policy

One major consideration when setting up a life insurance policy is who will own the policy. Policy ownership can dramatically affect what happens to the life insurance policy. Because of this, life insurance companies will only allow policy owners to take out life insurance policies on people in whom the policy owner has an insurable interest.

This normally includes only the policy owner and immediate family members . Other examples of insurable interest persons would be business partners.

Advantages Of An Irrevocable Beneficiary

The main advantage to naming an irrevocable beneficiary is that it ensures that money goes where you want it to go. Difficult to change during your life and virtually impossible to alter after your death, its for the bequests that youre 100% sure of and dont want to have to worry about keeping up to date.

Children are often named irrevocable beneficiaries. If a parent wanted to guarantee money to a child, then the parent could designate that child as an irrevocable beneficiary, thus ensuring the child will receive death benefits from the life insurance policy or segregated fund contract. A parent might also make their spouse an irrevocable beneficiary to ensure that they have the means to support their offspring properly and not be dependent on someone else.

As a way to safeguard an inheritance, making a beneficiary irrevocable can be especially important in this era of multiple marriages and blended families. A stepparent cant cut off a child from a previous marriage or alter or challenge a policy after the death of the insured. In case of a messy divorce, naming a child rather than a spouse as the policys irrevocable beneficiary could be preferable.

A beneficiary designation means that the funds in question dont have to go through probate, so the recipient gets them faster.

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What Happens If Your Beneficiary Passes Away Before Or At The Same Time You Do

If your beneficiary dies before or at the same time as you, then the death benefit either goes to a contingent beneficiary or is paid to the estate. If the beneficiary dies first, then it is paid to the estate of the policy owner. If the beneficiary dies after, then the death benefit is paid to the estate of the beneficiary.

The best way to ensure that someone you choose gets your policys death benefit is by adding contingent beneficiaries. These are back-up beneficiaries who become eligible for the death benefit if the primary beneficiaries pass away. Think of your contingent beneficiaries as your life insurance safety net!

Speaking with an insurance advisor can help map out a route for your life insurance policy death benefit in the event that your beneficiary is no longer alive to receive the funds. This additional planning ensures that the financial protection from your life insurance policy will always land in the hands of someone you choose.

Who Can Contest Beneficiary Designation

Life Insurance Policy Changes

Usually, life insurance beneficiary disputes arise in the context of a family feud, divorce, marriage, separation, or the insureds illness. Anyone with a valid legal claim can dispute the existing beneficiary on the policy.

In the majority of cases, those disputing the existing beneficiary designation have a claim for benefits that is based either on a contract or divorce decree or on allegations of undue influence, duress, insureds mistake or mental incapacity.

Beneficiary disputes are complex and require legal counsel on both sides. Our firm has successfully handled many beneficiary contests. We are aware of the legal issues involved in such cases and have the experience necessary to resolve them.

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Special Circumstances For Changing Beneficiaries

In some circumstances like in specific terms of a divorce or if you made what’s called an “irrevocable designation” you may not be able to change or name a new beneficiary without getting your current beneficiary’s consent.

Similarly, if you have transferred ownership of an account or life insurance policy to someone else, you are no longer the owner of it so you cannot change the beneficiary.

Generally, you, your financial professional or your attorney will know if any of these cases apply to you.

What Happens If I Don’t Name A Beneficiary

If you dont designate a beneficiary, it may be unclear who is entitled to the funds, which can delay the benefit payment.

For retirement accounts like a 401, if you die without a beneficiary named, your assets will likely be held in probate a legal process where a court has to sort out your financial situation and determine how to distribute your assets.

Most life insurance policies have a default order of payment if you do not name a beneficiary. For many individual policies, the death benefit will be paid to the owner of the policy if they are different than the insured person and still alive, otherwise it will be paid to the owner’s estate. For group insurance policies, the order typically starts with your spouse, then your children, then your parents, and then your estate.

If there is no default order specified in your policy, the payout may be paid to your estate, or may also be held in probate.

In either case, the probate process can be lengthy and complicated, and it may take years before your loved ones can access your assets which can be avoided if you designate them as beneficiaries.

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Challenging A Life Insurance Beneficiary Designation Because The Change Was Fraudulent

It is important to note that fraudulent changes in beneficiary designation are exceedingly difficult to prove. Anyone can legally be named as a beneficiary by an insured regardless of the relationship between both parties.

Even so, circumstances may prove that a change of beneficiary was fraudulent. For example, if the insured was mentally compromised by dementia, Alzheimers, or some other condition when they changed the beneficiary designation, that would invalidate any change in beneficiary.

Challenging a Life Insurance Beneficiary Designation because the Change was Made under Duress

Unfortunately, we have had cases where a caregiver or purported romantic partner manipulated or forced the insured to change the life insurance beneficiary designation to themselves. Any late-in-life beneficiary change, or a last-minute beneficiary change, should be treated as suspicious.

What Happens If Both Your Beneficiary And You Die At The Same Time

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Lets assume that your spouse is your beneficiary and that both of you were to pass away at the same time . If thats the case, your death benefit will be passed on to either your estate or your contingent beneficiaries. However, if there is any proof that your spouse outlived you , the insurance benefits will be paid to your spouses estate.

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The Importance Of Working With An Experienced Probate Attorney

When you have a foot problem, you go to the podiatrist. When you have a heart problem, you go to the cardiologist. When you need to create an estate plan or are facing a situation that will involve the Michigan probate courts, you need to go to an established probate and estate planning attorney.

In Michigan, an experienced and knowledgeable attorney can assist

When You Need to Challenge or Contest a Beneficiary Designation

If you believe that you have standing and are considering disputing a registration in beneficiary form, an attorney can carefully evaluate the details of your case and explain the best course of action. An experienced legal professional can help you gather the facts, perform due diligence, and understand the unique variables of your situation including if you do indeed have a valid claim. Moving forward, an attorney can hone a strategy to work toward the best possible outcome in your situation.

Whatever your circumstances, remember that contesting a beneficiary designation can be complex and trying. Its easy to feel overwhelmed. Working with an experienced probate litigation attorney can make this process easier, giving you the guidance, insight, and legal support you need to move forward with confidence and peace of mind at every step of the way.

Avoiding Issues Through Meaningful Estate Planning

Life Insurance Death Benefits: What You Need To Know

There are a lot of different kinds of life insurance: A policy can be temporary, or last a lifetime. It can have a cash value component or not. But the one defining feature shared by all life insurance policies is a death benefit. Its the primary reason to get life insurance, and how policies are almost always described: when someone says they have a $100,000 policy, it really means they have $100,000 worth of death benefit insurance. This article will tell you more about:

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Challenging A Life Insurance Beneficiary Designation Because There Was A Forged Life Insurance Beneficiary Change

Yes, this is one of the most common reasons for life insurance disputes. Where there are allegations of a forged life insurance beneficiary change, typically, a family member may have originally been named beneficiary, yet the policyholder recently designated someone else to receive benefits in their place.

It is important to note that fraudulent changes in beneficiary designation are exceedingly difficult to prove. Anyone can legally be named as a beneficiary by the policyholder regardless of the relationship between both parties.

Still, there are specific circumstances during which a change of beneficiary can be fraudulent.

For instance, written or eyewitness evidence may be able to prove that the change of beneficiary form signed by the policyholder was completed under duress or by someone other than the policyholder.

The policyholder may also have been mentally compromised by dementia, Alzheimers, or some other condition, which would invalidate any change in beneficiary. Without concrete evidence, however, allegations of fraud are nearly impossible to prove.

Weve been able to prove them in certain circumstances.

For example, in one case the insured was bedridden, and her daughter gave herself power of attorney and changed the life insurance beneficiary from our client to herself. We got our client paid.

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