by sammy227 » Thu Jun 03, 2010 01:40 pm
Here's the situation. A friend of mine's dad died over a year and a half ago. When she was really young, her parents divorced. Her dad was never a part of her life or her brothers. They learned of his death from distant relatives that saw his obituary in the paper. It comes out that he never remarried, but does have another daughter. My friend and her brother figured he didn't have anything as far as an inheiratence goes, so they signed paper work for their half sister to be the administrator of the estate. Now, it turns out that he did have two life insurance policies that did not list anyone as beneficiary on it. I hope I'm wrong on this, but from what I've read, since there was no beneficiary listed, it now becomes part of his estate. They are all fighting over this. Is my friend and my brother entitled to 1/3 of the policies? My friend keeps telling me that her half sister has to split the money three ways. As administrator, is she by law obligated to do this, or can she do what she wants?
Posted: Fri Jun 04, 2010 12:17 am Post Subject:
It really depends on the state in which he resided. In the absence of a named beneficiary, in most cases the policy proceeds would indeed be paid to the decedent's estate. If this is the case, and it sounds like it is, then his will would take over.
If he died without a will, known as "dying intestate," the assets will be distributed according to state "intestacy" laws. Therefore, state law will decide who gets the assets and in what amount out of the estate. The administrator of the estate CANNOT do whatever she wants. In that you used the term "administrator" in your post, my assumption is that there was no will in place. If there is a will in place, the person who takes care of those matters is referred to as an "executor" instead of an administrator.
So, the idea of 1/3 going to each of you may or may not be the case. As well, the estate is responsible for all costs associated with the decedent's death. While the estate may be exempt from estate taxation depending on the estate value, it's likely subject to probate costs, which are normally a percentage of the gross estate value.
So, since the proceeds were paid to the estate, that action, in and of itself, created higher estate settlement costs.
I hope this gives you some information even if it's not what you were hoping to hear. Again, the state where he lived is important to specifically determine what's going to happen.
InsTeacher 8)
Posted: Fri Jun 04, 2010 02:15 pm Post Subject:
Thanks I think I understand. I hope my friend does get something. From what she tells me, he did not have a will. I haven't spoken to her in a few weeks and last night when she called she said that her half sister's attorney was going to fedex her half of the policies which is 60k. Not sure if this is true.
Posted: Fri Jun 04, 2010 09:18 pm Post Subject:
It also matter who owns the policy.
Posted: Sun Jun 06, 2010 12:43 am Post Subject:
Hire a lawyer
Posted: Sun Jun 06, 2010 02:35 am Post Subject:
It also matter who owns the policy.
At this point, the policyowner is moot. The insured died and the only effect is that the death benefit will be included in his gross estate value as it seems it was payable to the estate. It also seems likely the insured was the policyowner and I think that's the gist of your post.
First-party ownership of a life insurance policy will gross up the decedent's estate by an amount equal to the death benefit. In this case, that's moot. Since the death benefit was paid to the estate, the estate has already been "whacked" for the death benefit; it won't be whacked twice in the event of first-party ownership.
The IRS can gitcha, but this time they only do it once.
InsTeacher 8)
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