Our client was the sole primary beneficiary on his ex-wife’s individual life insurance policy. When he learned of his wife’s passing and filed a claim for life insurance benefits, the insurance company informed him that his claim could not be paid, because a competing claim for benefits had been filed by the ex-wife’s daughter. The daughter’s claim was based on the fact that after the divorce the insured created a trust and included her life insurance policy in the trust’s assets. The insured also created a will and designated the trust as the only recipient of her assets, including the life insurance policy on her life. The insured then named her daughter as the trustee. However, the insured never contacted the insurance company requesting a beneficiary change. She never changed the beneficiary.
Before he retained our law firm to represent him in the ensuing interpleader, our client had unsuccessfully attempted to negotiate a settlement with the insured’s daughter for several months. The insurance company gave both parties a chance to agree on a settlement and when a settlement could not be reached, it filed an interpleader (a court action). Our firm took over the case and entered into negotiations with the daughter’s attorneys. We were proud to having been able to reach a result satisfactory to our client. He received the benefits due him under the policy and avoided costly and lengthy litigation. Our life insurance attorneys worked diligently to protect our client’s rights to the life insurance benefits.
Why You Need a Life Insurance Lawyer When You Contemplate a Divorce
When people divorce, their life insurance policies require special attention. The divorcing parties need to update their beneficiaries by contacting the insurance company and following its procedure for beneficiary change. If they wish for their ex-spouse to remain a beneficiary on their policies, they should re-designate them after the divorce to make sure their pre-divorce designation is not automatically cancelled.
In individual life insurance policies, state laws often dictate what happens to an ex-spouse who remained a primary beneficiary on the policy. Many states now have statutes that automatically revoke a former spouse as a beneficiary on the policy. It means that if a divorced policyowner never updated his beneficiary by contacting the insurance company and following its procedure for changing a beneficiary, the ex-spouse will not be able to get the benefits after the policyowner’s death. In states that do not have such laws, the ex-spouse remains on the policy and may have a valid claim for benefits after the insured’s death.
If the insured created a will or a trust after a divorce and included his life insurance policy in them, but failed to update a beneficiary on his policy, the existing beneficiary may have a valid claim for life insurance money after the insured’s death. The situation may be even more complex is a life insurance policy is a group policy and is governed by federal laws. To avoid potential problems and confusion, we recommend our clients to consult with an experienced life insurance attorney who will help them sort through the intricacies of life insurance laws and protect their rights.