Transferring ownership of a life insurance policy is possible, and the process will vary depending on the type of policy, the insurer’s rules, and the purpose behind the transfer. If you need a Tennessee life insurance lawyer call us. Below are some common methods to transfer ownership of a life insurance policy:
1. Absolute Assignment
Absolute assignment is one of the most common ways to transfer ownership of a life insurance policy. In this case, the policyholder (the assignor) transfers all ownership rights of the policy to another person or entity (the assignee). This transfer is permanent and irrevocable, meaning that the original policyholder will no longer have any rights to the policy once the transfer is completed.
When the ownership is transferred through absolute assignment, the new owner will have full control over the policy. This means the assignee can make changes to the policy, including altering beneficiaries, adjusting the coverage, or even surrendering the policy for its cash value. Absolute assignment is typically used when the policyholder wants to relinquish control permanently.
2. Change of Beneficiary
Although changing the beneficiary doesn’t technically transfer ownership of the life insurance policy, it’s an important option to consider. Instead of transferring the actual policy ownership, the policyholder can change the beneficiary designation to redirect the death benefit proceeds to another person or entity.
By changing the beneficiary, the policy proceeds will be paid directly to the new beneficiary upon the policyholder's death. This method doesn’t affect the policyholder's rights to the policy; they remain the owner and can make adjustments to the policy in the future.
3. Sale or Gift (Life Settlement)
Another way to transfer a life insurance policy is through a life settlement or gift. In a life settlement, the policyholder sells their life insurance policy to another person or entity for a negotiated price. This typically occurs when the policyholder no longer needs the coverage or wants to liquidate the policy’s value. The new policyholder then assumes the responsibility of paying future premiums and will receive the death benefit upon the insured's death.
Alternatively, the policyholder may choose to gift the policy to another individual or entity. A gift of life insurance allows the policyholder to transfer ownership without receiving compensation. This is commonly done as part of estate planning or to provide a benefit to a loved one or charitable organization.
4. Transferring to a Trust
A life insurance policy can also be transferred to a trust. This method is commonly used for estate planning purposes. By transferring the policy to a trust, the trust becomes the new owner of the policy, and the proceeds from the policy will be distributed according to the trust’s terms upon the policyholder's death.
Transferring life insurance to a trust can provide several benefits, including:
Estate tax benefits: By moving the policy out of the policyholder’s estate, it may reduce estate taxes.
Control over distribution: The policyholder can specify how the death benefit is distributed, such as to minors or individuals who may need ongoing financial management.
Protection from creditors: Life insurance proceeds held in a trust may be protected from creditors in some cases.
5. Corporate or Business Ownership
In some situations, life insurance policies are owned by a corporation or business entity rather than an individual. This is often done for purposes like key person insurance or executive benefits. If the ownership structure of the business changes, such as a merger, sale, or change in the business structure, the life insurance policy ownership may need to be transferred accordingly.
In these cases, the company or entity that owns the policy would typically facilitate the transfer, ensuring the policy remains in place to protect the business's interests.
What to Do If You Have a Denied Life Insurance Claim or Beneficiary Dispute
Transferring ownership of a life insurance policy can be a complicated process, especially if there is a denied life insurance claim or beneficiary dispute. If you find yourself in a situation where your claim has been denied, or there is confusion over who the rightful beneficiary is, seeking legal assistance is essential.
Our life insurance attorneys specialize in handling disputes related to denied claims and beneficiary disagreements. If you’ve encountered difficulties with a policy transfer or claim, we can help guide you through the process, represent your interests, and ensure that you receive the benefits you are entitled to.
Call us today.