A beneficiary form is one of the most helpful estate planning tools, but don’t make the mistake of not filing. Even if the form is signed and sealed, it will not be accepted by your financial institution if it is not filed—unintentionally leaving your loved ones out in the cold despite your good intentions.
Beneficiary Forms: A Case Study
In November 2010, a man filled out a life insurance change-of-beneficiary form to make his wife the sole beneficiary of the policy. Unfortunately, no one mailed the form to the insurance company.
So when the husband died a few months later and the woman filed a claim to receive the proceeds, the insurance company denied it. The proceeds were distributed instead to the named beneficiary on the policy.
She showed the insurer the completed but unfiled form, and she also pointed to a clause in her husband’s will that named her as his sole heir to everything, including the payout from the life insurance.
After a second denial, the woman sued. However, the court found in favor of the insurance company, noting that the insurer’s denial was reasonable, given the policy requirement that the change-of-beneficiary form be filed within 30 days.
The court also noted that the will’s statement about the life insurance policy was immaterial. Life insurance is a non-probate asset—which is actually one of the advantages of including life insurance in an estate plan—and a will has no authority when it comes to non-probate assets.
The Eighth U.S. Circuit Court of Appeals agreed with the lower court and the life insurance company: the will could not change the policy beneficiary. This decision, though, also pointed out that the life insurance proceeds could have been part of the estate if the estate had been a named beneficiary of the policy.
Your Estate Planning Attorney Can Help
This incident should serve as a reminder to review your estate planning documents from time to time and to include any life insurance policies or retirement funds in that review. A TuckerAllen estate planning attorney can help with the details.