What?! He Didn’t Change The Beneficiary?

By Douglas Clark Hollmann, Esq.

Most people have life insurance. Once the policies are written and put away for safe keeping, no one goes back to review them and check on what is going to happen when they finally pass on. It’s like our wills. No one wants to think about dying. Later, as the kids say.

Lawyers often see the results of this inattention when they start putting someone’s estate together and find life insurance policies that everyone forgot about. Sometimes someone gets a nice surprise; sometimes the surprise is unpleasant, particularly if you’re married to a once-divorced spouse.

Take a situation that occurs in some marriages. Mr. & Mrs. Happily Married start to fight. They get lawyers and go at it. Eventually, a settlement is reached. They divide up the marital property and renounce any claims they might have to the other’s estate. (Without this language, the survivor would inherit from the other should one of them die before the divorce becomes final.)

But most agreements do not contain language dealing with life insurance, and most attorneys never address this problem. If hubby never changes who is named as the beneficiary on his life insurance policy, he could be helping the wrong spouse. If he dies without changing the beneficiary, the life insurance company is going to tell his widow that they’re going to pay the dead husband’s former wife and not her. Why? Because the life insurance policy is a contract between the dead husband and his life insurance company. The life insurance company pays the person designated in the beneficiary clause, not the widow.

The second wife sometimes sues, claiming that her dear departed husband never intended that his first wife, whom he had divorced years before, get life insurance that was really intended for her, the woman he was married to at his death. The second wife has lost every time. The courts have refused to go along with the second wife because it means they would have to get into the business of guessing what the decedent wanted to do. Otherwise, they point out, the courts would be besieged by lawsuits claiming that someone knew what the decedent really wanted when he forgot to change the beneficiary on his life insurance policy.

There are people who think divorce is an improvement over marriage. They claim that divorces are expensive because they’re worth it. But whether you leave your marriage whistling or crying, make sure you change the beneficiary on your life insurance policy. Go see your insurance agent and change the form. Do it now. Better yet, make sure you put language in your separation agreement to make it clear that you intended to change the beneficiary in your policy in case you don’t get around to it and get run over on the way home from your lawyer’s office.