The Importance of Beneficiary Designations

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May 2016

In the court case noted below, the beneficiary retained all rights to the life insurance policy’s proceeds even though she didn’t fulfill the understood, but unwritten, intent of the deceased. In this case, the deceased intended for the proceeds to support her minor son through the receipt of proceeds by her sister (son’s aunt). Trial court ruled in favor of the child and then the appeals court overruled the decision. Nothing like keeping it in the family!

Takeaway…the beneficiary designation needs to match your intent and objectives. Even when it’s family (or more so), get it documented.

Regards,

Robert E. Hunt II, LIC, CIU
Principal & Life Insurance Advisor
269.552.3252
rhunt@rosestreetadvisors.com

Tennessee Court Holds Intent Is Not A Factor in Payment of Life Insurance Benefits to a Designated Beneficiary

The Tennessee Court of Appeals determined that the decedent’s sister, as a designated beneficiary of life insurance proceeds insuring the decedent’s life, was entitled to retain those proceeds even though the sister did not act in accordance with the decedent’s intentions, despite the decedent’s reliance on the understanding that the sister would use the proceeds to care for the decedent’s son when the decedent named her as a policy beneficiary.  The court stated that because a life insurance policy is a contract, unless there are ambiguities in the language of the policy document, the intent of the parties at the time the beneficiary designation document was executed is irrelevant and equitable remedies such as promissory estoppel will not control the payment of the life insurance proceeds. Want to know more? Download the judge’s final opinion here. 

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This information has been provided by the Association for Advanced Life Underwriting.