by Guest » Mon Oct 22, 2012 10:13 pm
I was married to my ex for 20 years. We divorced in 2009. We both have whole life and term life policies we bought while married. We named each other the beneficiary of those policies. He's remarried. He's removing me as beneficiary on the policies he owns which insure his life. However our final divorce decree states that," [the wife, me] is awarded as her sole and separate property.... a portion of [husband's] life insurance policy insuring the husband's life up to an amount of 200,000."
Since he'll be changing the primary beneficiary on both those policies, (this was all done in Texas btw) I'll have to take his new wife to court to collect that insurance money right? Not unless she acts completely out of character and actually just pays me the 200k when they send her the check.
Is this going to be family court? Probate court? what kind of lawyer will I need? Is there anything I can do now to prevent a situation like this before it comes to pass?
Since he'll be changing the primary beneficiary on both those policies, (this was all done in Texas btw) I'll have to take his new wife to court to collect that insurance money right? Not unless she acts completely out of character and actually just pays me the 200k when they send her the check.
Is this going to be family court? Probate court? what kind of lawyer will I need? Is there anything I can do now to prevent a situation like this before it comes to pass?
Posted: Tue Oct 23, 2012 12:06 am Post Subject:
No court necessary. You need to (right away) make sure that the insurance companies that have issued the life insurance policies are aware of the divorce decree requirements.
Contact them immediately and make sure that they have copies of the decree. They may require notarized or certified copies, but make sure this is done right away. The insurers will adhere to the decree even though your ex may not want to. They have no choice, it's a judgment of the court.
InsTeacher 8)
Posted: Tue Oct 23, 2012 12:33 pm Post Subject:
The issue isn't that he's changing the beneficiary designation. As owner of the policy, he is allowed to do that. The divorce decree isn't stopping him from doing that on any policy that he owns. The problem is that nothing has been done to change the actual ownership of the policy.
The court order is between the husband and wife. The insurance company won't make any changes without receiving whatever paperwork they typically require for an ownership change. Does the court order make mention of a specific policy number?
Posted: Tue Oct 23, 2012 05:41 pm Post Subject:
The court order is between the husband and wife.
While that may be true, you don't understand the law of contracts.
What InsTeacher has stated is 100% correct, and is the same advice I just gave to the OP who emailed me separately. The divorce order does not necessarily need to identify a policy number. It very well could include SGLI, and if you go to their website, you will read that they will abide by any QDRO or other court order assigning an interest in the death benefit. The same would be true of a self-funded employer-sponsored plan under ERISA (although group life insurance is rarely self-insured).
As owner of the policy, he is allowed to do that
This is where your lack of knowledge of contract law becomes apparent.
The divorce order acts to create an EQUITABLE ESTOPPEL on the ex-husband's ownership right to change the beneficiary -- in essentially the same manner as a collateral assignment. On the other hand, an estoppel by laches could be created by the OP by failing to notify the insurance companies of the QDRO/divorce order, and subsequently barring her recovery years down the road.
nothing has been done to change the actual ownership of the policy.
This is the advice I usually give to folks who are about to walk into divorce court. Obviously, changing ownership solves all discussion of who was or wasn't supposed to be the beneficiary -- since the new owner can do as they please in that regard.
So, as for changing ownership, I would agree that such a solution has obvious advantages. But it is also not a possibility with SGLI, which is precisely why the OSGLI will enforce a QDRO or other order on the policy -- if they receive notice of the order prior to paying a death claim.
In the present circumstance, the proper course of action is for the OP to serve certified copies of her court order on each insurance company involved. They will respond to her in writing indicating that they have acted to protect her interest.
Posted: Tue Oct 23, 2012 06:35 pm Post Subject:
Max,
1)This is not a QDRO, so all of your QDRO knowledge is useless here.
2)The wording of the original post is confusing, but it sounds to me like she has been awarded ownership in a life insurance policy up to $200,000. It is confusing because it says that is the rewarding of the policy as opposed to the right of $200,000 of death benefit.
The reason why I asked about the policy number is that it seems to be critical. We are talking about multiple policies and it could involve multiple companies. An insurance company has no way of knowing whether the husband has his ex-wife as a $200,000 beneficiary with some other policy or if this requirement has been taken care of with another insurer.
Here's something different, but makes the same point. Max is 73. He has an IRA with ABC Company along with an IRA from at least one other company. He calls up ABC and asks them to calculate and send his 2012 RMD to him. Will they do that? No. Why not? They have no way of knowing what his RMD is.
Posted: Tue Oct 23, 2012 10:09 pm Post Subject:
The wording of the original post is confusing
Hardly. Her divorce order grants her a $200,000 interest in existing life insurance (at the time of the divorce). What's so hard to understand?? Perhaps the next dumb thing you'll be writing is that she is not entitled to the full $200,000 because the order says "up to $200,000".
I realize this particular "thing" is not a QDRO, which is why I specifically added "or other court order". It is a divorce decree, as I repeatedly emphasized. But the law of contracts applies equally to any legitimate money judgment in a family court matter, whether a civil judgment, a divorce order, or a QDRO. The difference is that the order of the court specifies a particular class of marital asset. A common civil money judgment, such as a wrongful death claim, cannot be assessed against a life insurance policy.
The reason why I asked about the policy number is that it seems to be critical. We are talking about multiple policies and it could involve multiple companies.
Contract numbers are meaningless, as are multiple companies. The order is specifically -- and wisely -- "vague" so that the ex-spouse has the freedom to pursue her claim against any policy. If a specific contract number were stated, and for any reason that contract ceased to exist, where would the ex-spouse be able to turn for satisfaction of her judgment? You have a propensity to make simple things obscure because you attempt to "parse" them to death.
An insurance company has no way of knowing whether the husband has his ex-wife as a $200,000 beneficiary with some other policy or if this requirement has been taken care of with another insurer.
And that's as it should be. If the ex-spouse were to make multiple claims against multiple policies (and even if she were to obtain more than the $200,000 to which she is entitled), it's a matter for the courts, not the insurance companies, unless they happen to talk to one another. The court would do one of several things (as it does in similar civil matters unrelated to divorce -- such as P&C insurance cases involving multiple insurers on the same risk): (1) it may apportion the total claim among all the available policies (most equitable because it has the least effect on any one beneficiary), (2) it can award the judgment from any one policy that has the capacity to satisfy the total award, (3) it can do anything between those two extremes.
In the event a beneficiary obtains death benefit proceeds from an insurance company to which the beneficiary has no legal entitlement, the insurance company has no liability to the proper beneficiary UNLESS it knew or should have known that it was paying money to an improper party. The law shields the insurance company from such claims, and the rightful beneficiaries' claims are against the person who improperly received proceeds to which there was no entitlement.
That can result in a problematic outcome if the wrong party has managed to spend (or hide) all the money before other claims can be brought against them.
There is no suggestion here that anything like that would happen. The OP appears to be a person of integrity who would not attempt to collect more than that to which she is entitled. In her several additional emails to me today, she clearly is only concerned for her ability to obtain the $200,000 to which her divorce order entitles her.
Here's something different, but makes the same point. Max is 73. He has an IRA with ABC Company along with an IRA from at least one other company. He calls up ABC and asks them to calculate and send his 2012 RMD to him. Will they do that? No. Why not? They have no way of knowing what his RMD is.
I have no idea why you brought this example to this thread. It has ABSOLUTELY NOTHING to do with the question. It does not even come close to making the "same point". And, on top of everything else, it is entirely wrong!
While ABC might not be aware of what Max's "total" IRA values are, or what his total combined RMD is for the year -- they have no responsibility to do so -- they will calculate his RMD based on their own information -- the account for which they are custodian, and they will send any amount of money the client requests -- whether it is the full amount of the "calculated" RMD or not. They have no liability for his RMD other than to inform him that they have calculated what it is based on their specific knowledge.
But -- and maybe you don't know this -- every January, IRA custodians all across America send their account owners calculated statements based on their December 31 (prior year) account balance and their age as of December 31 (current year) that state what they believe the client's RMD is for the current tax year, based on the IRS actuarial tables.
The taxpayer is always responsible for the correct amount of their annual RMD. And they have until December 31 to take it.
So when they have more than one account, they usually ask a tax adviser to figure out their total RMD for them. The reality is, the sum of the multiple custodian-calculated RMDs will be very close to, if not slightly over, what the total RMD should be.
It's also a reason for persons with multiple IRAs to consolidate them with one custodian (they can remain separate accounts).
Posted: Wed Oct 24, 2012 12:03 am Post Subject:
Contract numbers are meaningless, as are multiple companies. The order is specifically -- and wisely -- "vague" so that the ex-spouse has the freedom to pursue her claim against any policy. If a specific contract number were stated, and for any reason that contract ceased to exist, where would the ex-spouse be able to turn for satisfaction of her judgment? You have a propensity to make simple things obscure because you attempt to "parse" them to death.
By making it vague, it stops an insurance company from being able to do anything proactive to protect her interests. Ex. The owner decides to cancel the policy. What can the insurance company do to protect her interests? Nothing. The owner can change the beneficiary or strip out all of the cash. Without a court order that is specific to a particular contract, there is no action that an insurance company is able to take.
If a court order says that Policy XYZ from ABC Insurance company must have Jane Doe as an irrevocable beneficiary for $200,000, company ABC can do something about that.
If a court order simply says that Jon Doe must make Jane Doe an irrevocable beneficiary on a life insurance policy insurance company, there is absolutely no action that Company ABC can take based upon that information because they have no way of knowing whether or not this requirement has taken place or not..
The idea with the divorce decree and insurance needs to be able to take care of these issues now so they aren't an issue for the courts at time of death. If it isn't handled now, she may find that there is no insurance at time of death.
Posted: Wed Oct 24, 2012 12:16 am Post Subject:
I have no idea why you brought this example to this thread. It has ABSOLUTELY NOTHING to do with the question. It does not even come close to making the "same point". And, on top of everything else, it is entirely wrong!
While ABC might not be aware of what Max's "total" IRA values are, or what his total combined RMD is for the year -- they have no responsibility to do so -- they will calculate his RMD based on their own information -- the account for which they are custodian, and they will send any amount of money the client requests -- whether it is the full amount of the "calculated" RMD or not. They have no liability for his RMD other than to inform him that they have calculated what it is based on their specific knowledge.
The point is that an IRA custodian has no way of knowing what someone's RMD is unless they are custodians for all of their accounts. As you know, just because I'm 73 and have a $100,000 IRA with Fidelity, it does not mean that I have to take any money from my Fidelity IRA for an RMD.
I brought this up because with a court order just talking about an insurance policy without specifics as to a company or a specific contract, there is no way for an insurance company to have any idea that the order relates to them.
Posted: Wed Oct 24, 2012 02:52 pm Post Subject:
there is no way for an insurance company to have any idea that the order relates to them
Again, your lack of legal understanding is interfering with your judgment. The order applies to EVERY insurance policy which was in force at the time of the court order. The insurance company ABSOLUTELY knows the order is APPLICABLE to them, whether a claim is ever presented or not. It just doesn't know if it will ever be presented with a claim. If it is presented with a claim, it has the right to inquire as to whether or not any other similar claims are pending with another insurer (just as medical or other disability insurance does), and may then coordinate with the other insurers to avoid overpaying its fair share of the $200,000 in question.
Now, back to your pointless RMD discussion.
The point is that an IRA custodian has no way of knowing what someone's RMD is unless they are custodians for all of their accounts
Fidelity knows that you had a $100,000 balance in your IRA on 12-31-2011. It knows your age on 12-31-2012 is 73. Your RMD based on that account value is $4048.58 (see: http://apps.finra.org/calcs/1/rmd -- where, conveniently, the default value is $100,000). Fidelity would have informed you of this RMD amount in January 2012, and advised you that you have until 12-31-12 to take that amount from one or more of your retirement accounts.
Fidelity could care less whether you have any other accounts or how much you have in them. It meets its fiduciary responsibility by telling you that you have an RMD to take, and what that amount is. They will act on your instructions to take any amount of money from your account you wish, up to 100% of your account's value on the day of redemption.
Yes, you don't have to take the RMD from your Fidelity account, but you have to take it one way or another, plus any amount of remaining RMD based on your other account value(s), or you will suffer the dreaded 50% penalty tax on the amount of distribution not taken.
Can you ask Fidelity to calculate your total RMD? Of course. You just have to show them what your other account balances were. Or you can use a calculator like FINRA's to calculate it for yourself.
Your example FAILS miserably on its face. "F" for legal and other misunderstandings, and "F" for wasting everyone's time. "C" for effort, because it is mostly a wasted one.
Posted: Wed Oct 24, 2012 04:11 pm Post Subject:
Again, your lack of legal understanding is interfering with your judgment. The order applies to EVERY insurance policy which was in force at the time of the court order. The insurance company ABSOLUTELY knows the order is APPLICABLE to them, whether a claim is ever presented or not. It just doesn't know if it will ever be presented with a claim. If it is presented with a claim, it has the right to inquire as to whether or not any other similar claims are pending with another insurer (just as medical or other disability insurance does), and may then coordinate with the other insurers to avoid overpaying its fair share of the $200,000 in question
.It is only applicable to them if there isn't a different policy that meets the requirement AND if the court order is still in effect. The insurance company has no way of knowing if it is applicable. Unless something specific is done on a proactive basis, the ex-wife will have no way of knowing if the policy gets cancelled or the beneficiary gets changed. At death, they will pay the death claim to the beneficiary unless the ex-wife challenges it before this happens.
If ex-wife says, "wait a minute, I am supposed to get that money", she won't be able to get it without fighting for it. How is she going to prove that there isn't another insurance policy in which she isn't the beneficiary? In other words, couldn't she try to make the claim on a policy for which she isn't the beneficiary and then at a later date claim the policy for which she is the beneficiary?
Regardless, it is 100% stupid to not take care of this as part of the divorce. She needs to become the owner or if that isn't possible become the irrevocable beneficiary. Trying to handle this at claim time is folly.
Posted: Wed Oct 24, 2012 04:19 pm Post Subject:
Sorry that is so difficult to understand. A custodian can do a calculation for a person based upon what is told to them, but they have no way of knowing if the information is correct or what else has been done.
Using your example of $100,000 requiring $4048 RMD, imagine that Mr. Smith took out $3,000 for the year and he is asking Fidelity whether he has met his RMD for the year. They can't give him a straight answer because they don't know what his RMD is for the year or what has taken from other places.
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