A life insurance beneficiary can be challenged by anyone with a legitimate legal or financial claim. Common challengers include:
An ex-spouse citing divorce decree terms
A current spouse in a community property state
Children or relatives alleging undue influence or mental incapacity
Estate representatives claiming procedural errors or outdated designations
In response to these disputes, insurers often delay payment or file an interpleader lawsuit, asking a court to decide who should receive the money. If you need legal help for life insurance disputes in Oregon call us.
Most Common Reasons Life Insurance Beneficiaries Are Contested
1. The Ex-Spouse Was Never Removed
It’s common for a policyholder to forget to update the beneficiary after divorce. In some states, this may invalidate the ex-spouse’s claim—but under federal rules like ERISA, the last written designation may still control. Other times, divorce decrees require keeping an ex-spouse or children as beneficiaries, even if the policyholder tries to change it later.
2. Community Property Conflicts
In community property states like California and Texas, any policy purchased with marital funds may entitle the surviving spouse to half—even if someone else is named. This often causes disputes when children from a prior marriage or new partners are listed as beneficiaries.
3. Undue Influence or Capacity Issues
Family members sometimes allege that the insured was manipulated into changing the beneficiary late in life, particularly if the new beneficiary was a caregiver or someone who held control over them. If mental incapacity or coercion is proven, a court may void the change.
4. Improper Beneficiary Change Process
Life insurance companies usually require beneficiary changes to follow strict rules—often needing specific forms, signatures, or witness verification. If the change wasn’t submitted correctly, the prior beneficiary may remain valid, leading to disputes.
5. Administrative Errors or Misunderstandings
Sometimes, changes are simply never completed. A policyholder might believe they made a change online, but it was never processed. Conflicting paperwork can also lead to confusion after death, triggering competing claims.
What Happens When a Dispute Arises?
If a dispute arises over the beneficiary, the insurance company may freeze the claim. In many cases, it files an interpleader in court—depositing the life insurance proceeds with the court and forcing the parties to litigate. This legal process can delay the payout for months or even years, depending on the complexity of the case.
Each side must present evidence, such as:
The life insurance policy and any amendments
Divorce decrees, wills, or trust documents
Change of beneficiary forms
Financial records or communications indicating intent
What to Do If You’re Involved in a Beneficiary Dispute
If you’re part of a beneficiary dispute—or believe the wrong person is about to receive life insurance proceeds—act quickly. Start by:
Collecting all documents related to the policy
Locating any court orders or legal agreements
Consulting with a life insurance attorney experienced in disputes and interpleader lawsuits
Time is critical. If the insurer files an interpleader or withholds payment, your ability to assert your rights depends on prompt legal action.
Our Life Insurance Attorneys Handle Disputed Beneficiary Cases Nationwide
Our firm has handled hundreds of life insurance disputes involving ex-spouses, stepchildren, community property claims, mental incapacity, and forged documents. Whether you’re trying to claim what’s rightfully yours or defending against a challenge, we offer experienced, aggressive legal support to protect your interests.
Don’t let an avoidable legal error or false claim prevent you from receiving life insurance benefits. Contact us today to schedule a free consultation and get the answers you need.