Celebrating 10 years! 2007-2017

Payment of life insurance/annuity proceeds upon death.

If decedent does NOT designate a beneficiary, my understandi jeffm06/19/17
You'd have to see the contract for the life insurance policy qdllc06/19/17
This is correct. I disagree with Onehell re: intestacy as t sjlawyer06/19/17
The statute is presumably just the intestacy statute, and th onehell06/19/17
Jeffm, qdllc hit it on the head. Our state's codes only thedudeabides06/19/17
Thank you everyone for your posts. Regarding the 2nd accoun jeffm06/19/17
makes sense (depending on the state, some have a higher limi dingbat06/20/17
Going to your OP, instead of estate being the default benefi 2tierreality06/19/17
jeffm (Jun 19, 2017 - 11:56 am)

If decedent does NOT designate a beneficiary, my understanding is funds go to estate. Speaking to account representative, I am told they will just cut a check directly to surviving spouse and skip the whole "estate" thing. I'm fine with that, but I'd like to know what authorizes them to do that. There is a 2nd account where I want to make a similar request. If I had a statute/regulation to back my request, it might be helpful.

Thanks.

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qdllc (Jun 19, 2017 - 12:23 pm)

You'd have to see the contract for the life insurance policy. Failure to designate a beneficiary might default to a de facto beneficiary in the contract (spouse first, then to children in equal shares if no surviving spouse). If such parties are easy to identify, maybe they can do that. Only when determining beneficiaries is problematic would it be easier for the insurance carrier to pay out to the estate and let the executor handle it from there.

Absent this, I would expect insurance proceeds to go to the estate...especially if there's a will designating non-traditional beneficiaries.

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sjlawyer (Jun 19, 2017 - 12:51 pm)

This is correct. I disagree with Onehell re: intestacy as the money isn't in the estate yet - that seems like a poor way to manage the risk of sending the funds to the wrong person.

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onehell (Jun 19, 2017 - 12:24 pm)

The statute is presumably just the intestacy statute, and they'll presumably have the spouse sign some kind of affidavit that there is nothing that would alter that default rule, like a will or a stepchild with an elective share, etc.

I think it's not so much whether there's a statute that allows it, so much as there's probably nothing that PROHIBITS it. Kinda surprising the insurance company is willing to take the risk of someone popping up with a claim and accusing the insurance company of not doing its due diligence (e.g. by insisting on an order appointing an executor), but I wouldn't look a gift horse in the mouth.

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thedudeabides (Jun 19, 2017 - 2:00 pm)

Jeffm,

qdllc hit it on the head. Our state's codes only address what happens in dissolution of marriage, non-probate assets are otherwise not affected. So it is likely that they contract for insurance has a waterfall of beneficiaries in the event you do not check who you want. Either way, you want to verify on the contract, otherwise I would stop them (unless as you said, the payment is going where you want). In particular, I know that military and federal civilian insurance contracts have a default provision (all to spouse, if not survived, all to kids, if no survived, generic laughing heir intestacy distribution chain).

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jeffm (Jun 19, 2017 - 2:11 pm)

Thank you everyone for your posts. Regarding the 2nd account, the representative says if the value was less than $50K, they'd have allowed collection via a small estate affidavit. The value exceeds $50k, and they want letters.

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dingbat (Jun 20, 2017 - 2:13 pm)

makes sense (depending on the state, some have a higher limit).
They need to know they're paying to the right person.

If the estate is over the small estate limit, the matter should go before a judge and a personal representative / administrator / executor needs to be assigned (get lots of certified copies). Said personal representative should then open an estate account at a local bank and collect any and all funds. This includes sending the appropriate form, with a certified copy of the judicial order, to demand payment of of the insurance policy proceeds be made into the estate account. Also send such requests to every bank, investment broker, etc. that is not in joint tenancy and does not have a pay-on-death beneficiary

Once everything is collected, if there's a will that's been approved, distribute according to the will, otherwise distribute according to law

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2tierreality (Jun 19, 2017 - 8:43 pm)

Going to your OP, instead of estate being the default beneficiary, it's not uncommon anymore for the master plan document related the the policy to designate "order of succession" in the event of an unnamed beneficiary; sort of contractual intestacy for purposes of the policy. I had one recently where order of succesion was: surviving spouse, then living children, then estate. Thus the language of the master plan document may permit a direct paymemt to the surviving spouse.

With regard to payout to estate, i have had mixed luck over the years where, if the ultimate estate beneficiary signs and indemnity and hold harmless waiver, the company will permit payment directly to the estate beneficiaries without having to open a probate estate. This works well where the beneficiary designation was never filed by the agent, and I make the agent tale up the fight with the insurance company, to accept the waiver.

Edit: also note on an ERISA plan, if there is no designated beneficiary it should default to spouse.

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