Can the court change a life insurance beneficiary named on the policy?
There have been certain cases in which the court didchange a life insurance beneficiary named on the policy, but it always included a legal battle of sorts and some valid reasons as to why the beneficiary should be changed. Further, this decision cannot be made by the life insurance company. It always must be a court-based decision to change the beneficiary if the insured has died.
But let’s not get ahead of ourselves. Let’s first start with defining the term “beneficiary”. The primary beneficiary is defined as the person who will receive the payouts from the life insurance when the insured passes away. If for some reason the primary beneficiary dies before the insured, the contingent beneficiary receives the life insurance benefits. And for most purposes, a beneficiary can be changed by the insured filling out the necessary paperwork required by the insurance company.
There are two general types of beneficiaries. The first is referred to as a revocable beneficiary, which means that you have the ability to change them in the future by simply filling out the necessary paperwork with the insurance company as previously discussed. The second is called an irrevocable beneficiary. This is a beneficiary that cannot be changed unless the beneficiary actually legally agrees to the change. If the irrevocable beneficiary refuses to sign the insurance company’s necessary paperwork, they will stay on the policy and a court will most likely be unable to change the conditions.
The courts typically end up getting involved when the insured dies and there are questions regarding to the named beneficiaries. These are certain situations which tend to prompt “gray areas” which can quickly escalate into legal battles. For instance, when marriages, divorces, births or even deaths happen very near to the insured’s death, this can create a question of if those new individuals should have been added/removed from the policy as a beneficiary.
These types of situation create the perfect storm for a legal battle to prove that someone should have been added or removed a life insurance policy as a beneficiary prior to the insured’s death. Further, if the insured is very ill and makes significant changes to the beneficiary very close to the end of their life, this can also create a situation in which there is a legal question of whether the insured was of sound mind at the time the decisions were made. Another potential scenario is when the family members of the insured do not agree with the beneficiary choices made, and this can result in a court case to be changed as well.
All of these situations end up being a warning for those that are going through the process of naming beneficiaries for a life insurance policy. Here are a few tips to keep in mind while deciding who and how many beneficiaries to name on your life insurance policy:
First off, if you are naming a minor beneficiary, keep in mind that you must also appoint a guardian to help manage the benefits until the minor beneficiary reaches 18. There should be thoughtful consideration into whom that guardian will be, as they will possess much of the power over the intended benefits.
Second, make sure to clearly state full names of the intended beneficiaries. Further, it is wise to include exact percentages or amounts that you would like them to receive. The less ambiguity, the less chance this will end up getting questioned or taken to court.
It is a wise decision to consider naming contingent beneficiaries to the policy. As previously defined, these are contingent beneficiaries that will only receive monetary payouts if the primary beneficiary dies before the insured. This way it will protect your benefits if the primary beneficiaries are not able to receive the payouts. There is also a final layer of protection called tertiary beneficiaries, which assumes that if the primary and contingent beneficiaries die before the insured, the tertiary beneficiary will receive the proceeds.
As stated before, the court does give options to someone that is looking to change the beneficiary on a life insurance policy for a multitude of reasons. However, it is always best to take precautions, plan ahead of time, and update your policy on a regular basis to avoid putting your loved ones through court room confrontations.
Until next time Michael Hartmann
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