Contesting a Life Insurance Beneficiary
If you thought you were the beneficiary of a life insurance policy, then discover that there are other claimants, it can be traumatic. You may feel betrayed by the individual who passed away or fear that a fraud has taken place. For whatever reasons, contesting a life insurance beneficiary may be your best option if you believe that this isn’t what the policy holder intended.
Get an Attorney Experienced in Contesting a Life Insurance Beneficiary
If you intend to contest a life insurance beneficiary, it’s best to consult with an attorney who is experienced in life insurance law and who has handled many other beneficiary disputes. The paperwork, legal filings and court or arbitration appearances will be complex and time consuming, so having an attorney on your side will help.
Don’t Delay Action
Time isn’t in your favor if you put off deciding about whether contesting a life insurance beneficiary is a good idea. While you’re trying to decide, the insurance company may move forward with an interpleader, which will move the case into the courts. At that point, you won’t have any choice but to legally defend your stance. You may also run the risk of the insurer paying the claim to the other beneficiary. Once that money has been released to them, it is much more difficult to recover the funds if you file a lawsuit after the payment. If they spend all the proceeds, it could take years to recover the funds and you will have to sue the individual.
Understand the State Laws & Order Before Contesting a Life Insurance Beneficiary
There are some states that require life insurance proceeds go to specific beneficiaries. This is often a spouse unless they agree in writing to waive their rights as beneficiary in favor of someone else. There may also be local court orders in effect that impact who the beneficiary is in a life insurance policy. Divorce and custody situations are the most common reason for court orders stipulating who must be the beneficiary or beneficiaries of a policy. A divorced parent may be ordered by the court to maintain life insurance that will ensure children continue to get child support of the parent passes away. Guaranteed spousal support through an insurance policy may also be stipulated in a divorce decree.
Sometimes the Beneficiary Designation Isn’t Clear Cut
Contesting a life insurance beneficiary is easier if there are ambiguities in a policy that could work in your favor. The insurance company has to pay the named beneficiaries, but if it isn’t clear who the beneficiary should be, they can hold onto those funds until they know for sure who is meant by the term “beneficiary.”
Some situations where this could be an issue include policies that use titles rather than specific names for beneficiaries or when a beneficiary no longer holds the status indicated in the policy. For instance, if the beneficiary is referred to as “spouse,” but the deceased was divorced, if the beneficiary is referred to as “child,” but is now an adult, etc. In some states, even if the beneficiary named is the former spouse, state law can supersede this in favor of the current spouse.
Take Action When You Suspect Undue Influence or Fraud
In most cases, if the courts determine that someone committed fraud or improperly influenced an individual shortly before their death, they will set aside a named beneficiary. Some examples include:
- Lying to or misleading someone to get their signature on a life insurance policy
- Getting a mentally incompetent individual to change the beneficiary on a policy. This might be someone who is mentally ill, delusional or suffering from dementia
- Coercing an individual to change the beneficiary by harming them, threatening them or bribing them
- Using a position such as power of attorney to force an individual to change the beneficiary
- Having someone who is ill and under the influence of pain or medications amend a life insurance policy shortly before dying
It’s clear that contesting a life insurance beneficiary is a complex and legally intricate action. To protect your interests and make sure no avenue is overlooked, contact a lawyer who has contested life insurance beneficiaries in the past. Their experience is your best protection against losing the insurance proceeds you are entitled to.