When a person purchases life insurance, they designate one or more beneficiaries to receive the insurance payment. When someone questions whether that named beneficiary should receive payment after the policyholder’s death, it is known as disputing a life insurance beneficiary.
Beneficiaries are often spouses, children, or close relatives of the deceased, and friends and family may not doubt that the beneficiary should receive the insurance payment. however, if someone believes there is a problem with the beneficiary, an adversarial court case may follow.
Can a life insurance beneficiary be challenged?
Anyone with a valid legal claim can challenge the beneficiary of a life insurance policy after the insured’s death. Often, someone who believes they were the rightful beneficiary of the policy initiates such a dispute.
Disputing a life insurance beneficiary is difficult and is often a lengthy and costly process. insurance companies do not have the power to remove a designated beneficiary. only the courts have the power to void a life insurance beneficiary.
can a beneficiary be removed from a life insurance policy?
During your lifetime, the policyholder can generally change or remove a life insurance beneficiary. however, those wishing to make such a change should be aware of the potential complications:
- Beneficiaries must be changed following the correct procedures with the insurance company. Beneficiaries generally cannot be changed by other means, such as a last will and testament.
- Changes made shortly before death or while the insured is physically or mentally incapacitated are more likely to be challenged.
- removal of a beneficiary must not violate a court order, such as a divorce decree.
- update beneficiaries after major life events or document that the lack of change was intentional
- follow insurance company procedures when changing beneficiaries
- involve witnesses in beneficiary changes that may be controversial, such as replacing an adult child with a new spouse
Other than the policyholder, only a court can remove a beneficiary from a life insurance policy. A court can only do this in limited circumstances that depend on the terms of the life insurance policy and any applicable state or federal law.
when are beneficiaries challenged?
Sometimes a close friend or family member of the deceased person may question whether the designated beneficiary should receive the insurance payment. this can happen if the beneficiary was updated just before death or while the insured was unwell. friends or family may feel that a new romantic partner or caregiver coerced the insured into changing the beneficiary. or the family may question whether an ill insured fully understood what she was doing by removing a beneficiary.
Someone might also want to challenge a life insurance beneficiary if the insured never updated their life insurance after a major life event such as a divorce, remarriage, or separation. for example, the family member may learn only after a person’s death that a former spouse is the beneficiary. the family may believe that the insured forgot to update the policy. in some, but not all states, divorce may be grounds for annulling the beneficiary.
Finally, a court may remove a beneficiary for specific legal reasons that depend on the terms of the policy and applicable state laws. examples include situations where the beneficiary caused the death of the insured or where a court order required that a specific person be named as beneficiary.
what happens when a life insurance beneficiary is challenged?
To contest a life insurance beneficiary, a person must file a lawsuit or other legal documents with the probate court that handles the deceased person’s estate. the insurance company will not disburse funds while the case is pending. the insurance company may withhold the payment or place it in a special escrow account administered by the probate court.
Both the designated beneficiary and the person challenging the designation may have to present evidence and legal arguments in court. Because these cases involve complex legal issues, attorneys and other experts may be involved in the case.
The court may refuse to distribute any of the assets, including real estate and bank accounts, while the case is pending. Since these cases can take a long time to resolve, taxes and other estate debt can accumulate. The parties to these cases may try to reach a settlement agreement to save time and money. however, beneficiary contests are often hotly contested and a compromise may not be possible. in these cases, a probate judge must determine the outcome.
reduce the chances of someone challenging a life insurance beneficiary
To reduce the chance that a beneficiary will object after your death, the policyholder may want to take precautions, including:
After the death of the policyholder, the chances of changing a beneficiary or avoiding a contest are minimal. persons involved in these situations may wish to seek the advice of an attorney.
If you’re looking for life insurance coverage or just want to learn more about your options, you can get a free plan quote online that allows you to compare different insurance plans from different companies. Or you can call to speak with a licensed insurance agent who can help you compare plans available where you live.
See also: Private Mortgage Insurance (PMI)