The beneficiary is not always clear to family members when a life insurance policy is settled. We recently came across an article on NJ.com offering advice on the unfortunate situation when the insurance for a deceased loved one has a beneficiary who himself/herself has pre-deceased the insured party. Did you follow that? Here’s the original question:
Q. My daughter’s husband just died unexpectedly and it turns out he had his parents as the beneficiary of his work life insurance. I guess he never changed it. His parents both died first, though. I know he would have wanted this to go to provide for his children. Can his siblings fight for this money?
— Mother-in-law
Ouch! we can only imagine how difficult it is to ponder a potential family squabble over insurance benefits even in the friendliest of family situations.
The simple answer provided stresses that the person who has the legal right to the proceeds of the life insurance policy is determined by beneficiary designations, and after that, it’s based on state law. First, look at the policy’s fine print and second, consult the laws of the state in which the policy was drawn.
For a sample answer, we followed through on the logic of this question based on the laws in the state of New Jersey.
“While anyone can fight for the life insurance proceeds, the deceased’s siblings don’t have a legal right to the money unless they’re listed as alternative beneficiaries on the policy,” said Nancy Heslin Reading, an estate planning attorney with Reading Law Firm in Newton, NJ.
“If they’re not,” she said, “the policy will state in the fine print what happens if the beneficiaries predecease the insured. It can be one of two things.
“The policy — most likely the employer’s human resources department will have a copy of this — will either say that the proceeds of the policy will pass to the employee’s estate to be distributed according to his will, or it will say that the proceeds will pass under the intestacy statute NJSA 3B:5.”
Reading said if the decedent has no children from a prior marriage, the entire proceeds should pass to his wife.
In practical terms, the wife can call her husband’s employer, specifically, the human resources department. If they do not know the answer, she should call the insurance carrier. Obviously, if this was a policy purchased directly from the carrier, that would be your first call.
“If for some reason they conclude they are not authorized to answer questions about this policy, ask a very global question: `In all situations where the beneficiaries predecease the inured, how is the benefit distributed?” Heading said. “If the siblings are not the alternate beneficiaries, they are not likely to get the money.”
It’s pretty clear what the primary lesson is in all of this: make sure your beneficiary designations are updated to reflect your intentions. When a beneficiary does pass on before the insured, by all means, update that beneficiary list. Remember what they say, you can’t take it with you!
Perhaps it is time to review all your life insurance policies to make sure it is very clear who the beneficiary is for each. We can help. Contact a Ziff Agency professional today.