by gguubb » Fri Oct 18, 2013 07:08 pm
My spouse recently passed away. He had 2 small life insurance policies naming me as beneficiary. We had been separated for about one year and his children from a prior marriage are contesting the life insurance saying that they were his personal property. Do they have any claim to these policies? We live in a community property state. He also had a larger policy that he owned and I was listed as the original beneficiary. He changed this policy naming his children as the new beneficiary about 2 years before we separated.. I did not know about this change and only found out after he passed away. I have contested this on the grounds that I have community property rights to the policy and it was changed without my consent and premiums were paid with community funds.. What are my rights on these policies.[/b]
Posted: Sat Oct 19, 2013 04:02 pm Post Subject:
his children from a prior marriage are contesting the life insurance saying that they were his personal property. Do they have any claim to these policies?
While life insurance is certainly owned, that has nothing to do with this situation. A named beneficiary has superior rights to the claims of spouses or children because life insurance is a non-probate asset. Only if the policy falls into the estate because there is no named beneficiary, would probate laws work to distribute the proceeds.We live in a community property state.
This does not confer any special right to the policy proceeds. At best, the courts have said, this may entitle a spouse to 1/2 of the policy cash value, but not 1/2 of the death benefit.He also had a larger policy that he owned and I was listed as the original beneficiary. He changed this policy naming his children as the new beneficiary about 2 years before we separated.. I did not know about this change and only found out after he passed away.
Unless this policy is governed under ERISA as an employer-sponsored welfare benefit plan, you have no say in the naming or changing of beneficiaries, married, separated, or divorced. It does not require your consent or prior knowledge unless you were named an irrevocable beneficiary, which is doubtful.I have contested this on the grounds that I have community property rights to the policy and it was changed without my consent
Forget the consent issue unless the policy is controlled by ERISA. As previously explained, if you have any "rights" to the policy at all, it is a right to 1/2 of the cash value at the time of the decendent's death, and nothing more.What are my rights on these policies.
Were you separated or divorced, and in what state did this take place? This, too, makes a big difference because almost all of the community property states have enacted legislation that revokes a former spouse's designation as beneficiary at the instant a divorce becomes final -- effectively stating that the former spouse has predeceased the insured -- unless the divorce decree says otherwise.The competing claims of you and the children are going to throw this whole matter into federal court in an Interpleader complaint. Each of the insurance companies involved will name all of you as Defendants, ask the court for permission to deposit the death benefit with the court, and let the rest of you fight amongst yourselves over what money is left. Each insurance company will get to keep about $5000-$7500 in "legal costs" per policy to bring the matter before the court.
You and the children will then have to hire attorneys qualified to practice in the federal courts to argue your positions. That will cost several thousand dollars also. If you lose, you could have to pay the attorneys' fees of the prevailing party(ies), which could be several additional thousands of dollars.
The smart thing to do would be for you and the children to sit down and calmly discuss this situation, perhaps with the services of a neutral third-party as mediator. That might cost a few hundred dollars, easily split between the parties.
Unless there is contradictory information not disclosed here, you could be entitled to the "two small life insurance policies" and the children would be entitled to the "larger policy," although you might be entitled to a portion of the cash value that existed, if any, as a community property interest as explained above.
If you can settle this dispute without involving attorneys, all of you will be better off in the long run.
Posted: Sat Oct 19, 2013 06:32 pm Post Subject: life insurance contested
The smaller policies have already been paid to me, his spouse. But the step children are contesting those pymts. The large life insurance policy has been put on hold by the insurance company and it will abide by the court's decision. The larger policy was a term life insurance issued in California. On the bottom of the "change of beneficiary" form is a spouse's signature line requirement for a change in a community property state if the original beneficiary was the spouse, giving spousal consent for change of beneficiary. A copy of the change of beneficiary form, my spouse checked the box that no signature was required. Also, my spouse became uninsurable 2 years after the policy was obtained. We had the policy for 8 years. I have had conflicting responses that I am entitled to 1/2 of the policy payout. Why does the change of beneficiary form have this spousal signature requirement if in a community property state? Thanks for your answers.
Posted: Sat Oct 19, 2013 06:34 pm Post Subject:
I also forgot to state that our divorce was not even close to being finished as nothing had been decided at all in the proceedings to date.
Posted: Sun Oct 20, 2013 12:17 am Post Subject:
On the bottom of the "change of beneficiary" form is a spouse's signature line requirement for a change in a community property state if the original beneficiary was the spouse, giving spousal consent for change of beneficiary
Regardless of community property laws, this is meaningless, and cannot be enforced EXCEPT in ERISA controlled contracts.Apparently your divorce was not final. California adopted the change in probate law that revokes a spouse as beneficiary in 2001 or 2002. Divorces which were final prior to the law being adopted were grandfathered and beneficiary designations were not altered. But all later divorces automatically result in the spouse being revoked as beneficiary.
If the insurance company paid money to you, believing you were the proper beneficiary, they are not liable for a second payment to the contingent beneficiary. But the contingent beneficiary (or estate) can come after the money in your hands if you were not lawfully entitled to collect the proceeds. You will have to defend your status as beneficiary.
I have had conflicting responses that I am entitled to 1/2 of the policy payout.
You are not. Not unless you were named a 50% beneficiary. Your only possible entitlement under community property laws is to the portion of premiums paid with community assets. And for that, you have to file a claim against the estate of the decedent in probate.If there were no named beneficiary, then as the still-spouse, if your divorce wasn't final, you would possibly be in line to receive some or all of the policy proceeds. But there were named beneficiaries, so you are out of luck on any portion of the death benefit unless the policy is covered under ERISA.
Posted: Sun Oct 20, 2013 01:07 am Post Subject:
Thanks.. I am starting to understand.. You are correct, our divorce was never finalized, not even close.. The change in beneficiary was done 2 years prior to even our separation, according to the change of beneficiuary change form. So basically, if I understand you right, I am not entitled to any of the life insurance proceeds, and my spouse had the right to change the policy without my knowledge, and to continue to pay it out of community funds. Does it matter at all that he became terminally ill before the change of beneficiuary and was uninsurable? Only asking all of this because I have been left with a lot of debt that the insurance could have helped with. As far as the smaller 2 policies, I was still named as beneficiary on them. The larger policy was not covered under ERISA as it was as privately bought policy
Posted: Sun Oct 20, 2013 01:19 am Post Subject:
my spouse had the right to change the policy without my knowledge, and to continue to pay it out of community funds.
Absolutely. You can make a claim against his estate for 1/2 of the premiums paid for the policy with those funds.Does it matter at all that he became terminally ill before the change of beneficiuary and was uninsurable?
No it doesn't. Insurability has nothing to do with beneficiaries.Add your comment