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Inheritance Nightmares: The Unchanged Life Insurance Beneficiary Form…

Inheritance Nightmares: The Unchanged Life Insurance Beneficiary Form…

Inheritance Nightmares: The Unchanged Life Insurance Beneficiary Form

                  Whether people fail to create an estate plan or sometimes even when they do, there a host of reasons why the plan or lack thereof can be a disaster.  This article will provide an example of an actual estate planning disaster.

Early in my career as an inheritance lawyer O’Fallon, Missouri, I worked at a small law firm in New Jersey.  Our office did a lot of divorce law.  A prior divorce client was able to obtain full custody of her young daughter and escape a pretty abusive marriage.

When the divorce was finalized, our office would always send a form letter explaining it was wise to change any estate planning and also things like life insurance beneficiaries.  The idea was that most people may not recognize that if they had their ex-spouse listed on a life insurance policy, the ex-spouse would still receive the proceeds of the policy if the client were to pass away.

This particular client had a very good job as an actuary and one of her benefits was a standard life insurance that she could pay extra to add term life insurance.  She made that election and at the time of her divorce the policy coverage was $1.5 million.

A year or so after her divorce, the client discovered that she had aggressive brain cancer.  She took a leave of absence from her work and within six months or so she passed away.

Her family was understandably worried about an inheritance for their granddaughter and contacted our law firm about a life insurance policy which the client had said before she got sick.  Prior to her death, she said she had changed the beneficiary to her parents, to hold the money for daughter’s needs.  When I looked into the policy there was a huge problem:  Ex-husband was still the beneficiary on the policy.  The change of beneficiary had never occurred.

As we later found out, about a year after the divorce, client had filled out paperwork to change the beneficiary to her parents.  However, her company’s policy was that the change had to be submitted through her HR Department.  Apparently the form got lost, the beneficiary was never changed and the ex-husband was still listed as the beneficiary.

A life insurance policy is a contract.  You could list your worst enemy as a beneficiary and when you pass your worst enemy will receive the proceeds, regardless of what you intended or what your estate plan says.

Eventually, our firm was hired to file suit on the basis that client’s intent was clearly to not have ex-husband to be the beneficiary.  We had some emails and the beneficiary change form to support our argument, but we knew it would be an uphill battle.

After two years of litigation (I had left the firm in the middle of the case), the two sides were able to settle on $1,000,000 for the husband, $500,000 for the young daughter.

Bottomline:  Who you want to inherit your things can change over time for a variety of reasons.  Divorce is clearly one of them.  Changing beneficiary forms is very important if they do not meet your wishes for inheritance provided to the right people.   It’s important to remember that when you are changing beneficiaries that you see it through.  That may not have mattered in this case because the HR Department screwed up, but on the other hand, it could have made all the difference for the young daughter.





               As an experienced estate planning lawyer St. Charles, I spend much of my time explaining to clients what estate planning is and how it works.  Estate planning is the use of legal documents to not only distribute your assets when you pass away, but to name people to make decisions for you if you become disabled and/or incapacitated.

Overview of Estate Planning Documents

Common estate planning documents include a living trust, last will and testament, medical power of attorney, healthcare directive and financial power of attorney.

A living trust can help you avoid probate and provide rules about when your beneficiaries receive their inheritance.  An example would be creating a provision where your beneficiary only receives their inheritance when they reach a certain age.  That age is up to you and depends on your specific situation.

As one of the top estate planning lawyer St. Charles, you can count on me to also review the purpose of having a last will and testament, which is another document which can distribute property when you pass away.  If you have a living trust, the will usually leaves the property to the trust, not directly to a beneficiary.

Power of attorney documents allow you to name a spouse to make financial and healthcare decisions for you if you become incapacitated.  An example would be naming your adult children to do banking for you if you had dementia.  A medical power of attorney could name the same adult child to work with doctors if the dementia advanced to a point where you were considered mentally incapacitated by a doctor.

Choosing the Right Estate Planning Lawyer

You should feel comfort with the skill level and personality of any lawyer you meet with.  Many attorneys practice in too many areas of law, which reduces their effectiveness in all areas of law that they practice.  Therefore, you should focus on choosing a lawyer that practices almost exclusively in this area.

Making estate planning decisions is intensely personal due to everyone having different family dynamics, levels of wealth and health and concerns about the ability of children to make smart decisions if they inherit your nest egg.  There are many different components to determining how your estate plan is created and it’s important that we discuss all of the aspects that help you identify these components.

An initial meeting to discuss your situation will include who should be in charge of distributing your inheritance, who your beneficiaries are and specifics about their personality and what assets you have.  Our focus is always on identifying client concerns and worries, client goals and educating clients on how the documents we are drafting resolve their concerns and accomplish their goals.  If you’re in need of an estate planning lawyer St. Charles, contact Legacy Law Center today.


FREE Missouri Estate Planning Guide

FREE Missouri Estate Planning Guide

Free Missouri Estate Planning Guide


Family of Robin Williams Involved In Estate Litigation

Family of Robin Williams Involved In Estate Litigation


Mr.  Williams hanged himself last year at his home in California.  He apparently had created an estate plan but a dispute has resulted between his wife and his children over the distribution of his personal property (a very common source of disagreement in many estates) and the cash needed by wife to maintain the home which was distributed to her out of the estate.  Given the wealth of the late actor, we can assume the home was large and thus the annual maintenance to keep it up was a number which could be (and is being) disputed between the children and the wife.

Arguably, these details could have been included in the estate plan created by Mr. Williams.  The annual maintenance costs in prior years could have been figured and an estimated figure obtained, assuming higher costs in the future.  Nevertheless, it appears that was not done and now his survivors are fighting it out in court.  This not only wastes time and energy, but creates bad blood among family members, all of whom have undoubtedly been devastated by the loss of their father and husband.

The lesson here is that estate litigation can be avoided with proper and thorough estate planning.  The estate plan here probably just needed to be more specific as to the maintenance costs for the home for the wife.  As the article states, however, the family has already received many differences which is good to hear.  Often estate litigation cases can drag on for years without a resolution and their costs can be staggering.