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Insurance company changing Beneficiary's after death

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laurie0662

Junior Member
What is the name of your state (only U.S. law)? Illinois
My brother in law passed away last month, his brother is the executor of his estate. His last will was changed in February of this year. He was never married and has no children. The brother has started the process of probate in the courts. The question/problem is that the BIL had a pension, 401K, term life insurance as well as Real Estate. The BIL thought that his current will would over ride older beneficiary documents. We understand that it does not. Having said that the 401K has already been disbursed to the beneficiaries. But the term life insurance had his parents as beneficiaries, they had predeceased him in death. No one will release information or copies of the beneficiary designations that were signed back in 1969. The insurance company sent the brother a form titled "Beneficiary's Affidavit" this form asks for the names of any and all spouses, children, parents and siblings still living of the deceased, as well as the executor of the estate. The insurance company has now sent the brother a letter stating that his money has been placed into a checking account that the brother has immediate access to. We were under the impression that since the parents predeceased the insured, that the monies would go to the estate and be disbursed by the intentions of the will. If these accounts are already being disbursed, then how is the estate supposed to pay for the bills that are pending? Now that the other beneficiary has received their money, there would be no way to get any of it back. They do not manage money well, and has probably spent all of it before the ink was dried on the check. What is wrong with this picture and how can we correct it? Any and all help and information would be greatly appreciated.What is the name of your state (only U.S. law)?
 


justalayman

Senior Member
a will cannot override a named beneficiary. Joint accounts will become the sole property of the joint owner. Transfer on death accounts will go to the named beneficiary.


so, that leaves the only question being the life insurance.

are you sure the money wasn't sent to the brother in his capacity as executor?

We were under the impression that since the parents predeceased the insured, that the monies would go to the estate and be disbursed by the intentions of the will
if you have not seen the beneficiary designation, how do you know the brother was not a contingent beneficiary?

I do know that any portion of the estate not addressed by a will or other means of distribution (joint ownership etc.) will be distriibuted to a spouse and children first and then, if there are neither of those, to the parents and siblings shared amongst them. Honestly, I do not know (but there are others here that do) if the insurance proceeds are controlled by intestate succession or if they do revert back to the estate if the named bene's are deceased. I believe the policy itself would provide some direction.

(d) If there is no surviving spouse or descendant but a parent, brother, sister or descendant of a brother or sister of the decedent: the entire estate to the parents, brothers and sisters of the decedent in equal parts, allowing to the surviving parent if one is dead a double portion and to the descendants of a deceased brother or sister per stirpes the portion which the deceased brother or sister would have taken if living.

monies would go to the estate and be disbursed by the intentions of the will.
how would that have been distributed if the will ruled?




.
If these accounts are already being disbursed, then how is the estate supposed to pay for the bills that are pending?
well, you use whatever assets the estate has and pay whatever bills that can be paid. Since brother of BIL is the exec, it is up to him to deal with it. If there are no estate assets, then the bills just don't get paid.


What is wrong with this picture and how can we correct it?
well, not trying to be cold or offensive but: how does it affect you?

what I would suggest doing is contacting the insurance company and ask them the rules for alternate disbursement of a policy's benefits in a situation such as yours. I doubt (at least they shouldn't) speak specifics of your BIL's policy but you may be able to have your questions answered there.
 

laurie0662

Junior Member
a will cannot override a named beneficiary. Joint accounts will become the sole property of the joint owner. Transfer on death accounts will go to the named beneficiary.


so, that leaves the only question being the life insurance.

are you sure the money wasn't sent to the brother in his capacity as executor?

No it was not sent in the capacity as executor. There are two beneficiaries and the other half of the funds were sent to them.

if you have not seen the beneficiary designation, how do you know the brother was not a contingent beneficiary?

This policy was from the BIL employer, they changed insurance companies several times for these policies. We saw the beneficiary designation form for the first policy which named the mother as the first beneficiary and the Father as the second. No other beneficiaries were named. When we sent the paper work back to the insurance company we told them of the two living siblings

I do know that any portion of the estate not addressed by a will or other means of distribution (joint ownership etc.) will be distriibuted to a spouse and children first and then, if there are neither of those, to the parents and siblings shared amongst them. Honestly, I do not know (but there are others here that do) if the insurance proceeds are controlled by intestate succession or if they do revert back to the estate if the named bene's are deceased. I believe the policy itself would provide some direction.




how would that have been distributed if the will ruled?

The will stipulates 99/1 split.



. well, you use whatever assets the estate has and pay whatever bills that can be paid. Since brother of BIL is the exec, it is up to him to deal with it. If there are no estate assets, then the bills just don't get paid.


well, not trying to be cold or offensive but: how does it affect you?

I am a good friend of the family; I have been helping the brother to get all of his affairs in order. I will not benefit financially from any of this.

what I would suggest doing is contacting the insurance company and ask them the rules for alternate disbursement of a policy's benefits in a situation such as yours. I doubt (at least they shouldn't) speak specifics of your BIL's policy but you may be able to have your questions answered there.
I apologize if this post is not done correctly, I am unable to find information on how to use this site. Any help on this would also be GREAT.
 
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anteater

Senior Member
Don't know about anybody else, but the basics are getting confusing. So, this is the situation:

1) There were 3 brothers. One passed away and had a life insurance policy through his employer. The beneficiaries were the mother and father, both of whom had predeceased the brother.

2) Someone sent something - the "Beneficiary's Affidavit"(?) - to the insurance company with information about the two surviving brothers.

3) The insurance company has placed the policy proceeds in an account under one brother's individual name rather than in that brother's name as executor of the estate of the deceased brother.

4) The brother figures that the money is his to do with as he desires.

Is that about it?

You did not respond to justalayman's question about contacting the insurance company. It could be that the policy itself provides for alternatives if the named beneficiaries are deceased. And they just screwed up. Or the insurance company intended to pay the proceeds to the executor of the estate and screwed up.
 
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justalayman

Senior Member
a bit more research leads me to understand that unless there was a contingent beneficiary, the insurance payment would revert to the estate.






So, a couple thoughts.

how does the affect the estate? Would it be an asset or would the estate still be insolvent even with this additional money.

I have been helping the brother to get all of his affairs in order. I will not benefit financially from any of this.
Who would benefit from the insurance money had it been added to the estate?

When we sent the paper work back to the insurance company we told them of the two living siblings
have you, or whomever you are assisting, contacted the insurance company to inquire about this?
 

laurie0662

Junior Member
I apologize that this is getting confusing, I will try to set every one straight and on the same page.

The Brother worked for a large financial institution, any and all information that we have received has come from an out sourced company that the bank has hired to talk to the families when a employee dies. They came to a meeting with the executor, myself and the executors CPA. The banks HR department would not release any information to the executor due to the fact that the letters of office were not finalized. But the banks agreement with this out source company is that they have all of the dollar amounts and other information of what is in any of his accounts, 401K, Pension & Life insurance. They also had the original beneficiary form for the original life insurance policy. As with everything in life things change, instead of the policy being with A company it was switched to B company (possibly from a merger) we have no knowledge of any other beneficiary forms. Saying all of that here is my reply to the questions asked.

1) There are 3 siblings. One passed away and had a life insurance policy through his employer. When he started his employment in 1969 he made his mother the main beneficiary and if she was to die before the brother, then the funds would go to the father. Both of the parents predeceased the brother.

2) When the executor contacted the insurance company he told them that both of the named beneficiaries are deceased and needed to know what documents need to be filed in order for the estate to receive the funds. The insurance company sent out forms to be filled out, one of them being a questionnaire (Beneficiary's Affidavit) asking for a list of people (Spouse, Children, Parents and siblings) who were still alive. This form was filled out and sent back to the insurance company.

3) The insurance company has placed half of the proceeds in a account under the brothers name and has sent a letter to the other beneficiary informing that they also have an account in their name with the other half of the account. These accounts are set up as individual ownership not for the estate of..

4) The brother does not want this money in his name he wants the account to go to the estate so the estate can pay for the funeral, property taxes, medical bills and so on.

With regards to the brother contacting the insurance company, he has spoken to them several times. They have now agreed to send him out information that would only refer to his half of the settlement. But is it to late since both of the beneficiaries have already received their payouts? What if the insurance company did screwed up how could they fix this?

In a answer to justalayman, the contingent beneficiary was the father who is deceased.

In regards to how it would affect the estate, there are two beneficiaries one who will receive 1% of the estate and the other 99%. The reason that one only gets 1% is due to the fact that when the mother died, her estate was never split because that beneficiary had access to the mothers accounts and depleted them.

If the insurance money was added to the estate then it would at least cover some of the outstanding bills.
 

justalayman

Senior Member
What if the insurance company did screwed up how could they fix this?
as long as the estate receives what it is legally due, do not concern yourself with what they can do to fix it. If distributed improperly, they will have to make payment to the estate. How or if they reclaim the improper payout is their problem.


In a answer to justalayman, the contingent beneficiary was the father who is deceased.
I meant after that. You can name multiple contingent bene's each in succession to the previous. Anyway, from your statement, I will accept that there was no other contingent bene.

as such, from my understanding, the insurance benefits should be paid to the estate... Unless there is something in the insurance policy saying otherwise. Obviously you are working on investigating that possibility.


If the insurance money was added to the estate then it would at least cover some of the outstanding bills.
if it would provide no benefits to any heir, it might be simpler to accept the mistake and move on with life.

If the brother that received insurance money wants to use it for expenses, he needs to investigate any tax concerns to avoid having this cost him any money and then pay for whatever for the estate and then make a claim against the estate realizing it will not be repaid or; He might be able to gift it to the estate as well. I'm not big on taxes so he should consult a tax advisor to ensure he does not cause himself any unforeseen tax debts.
 

anteater

Senior Member
Apparently, the policy itself provided for alternative beneficiaries if the named beneficiaries predeceased the insured.

Life insurance proceeds paid to beneficiaries generally are not subject to the deceased's creditor's claims.

Why is this brother so all fired intent on handing the money over to the estate so that creditors can be paid? Heck, if he really, really wants to do it, just write a check to the estate. Or pay the creditors directly.
 
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laurie0662

Junior Member
This whole money issue comes down to the fact that the brother has already paid out of his own pocket several thousands of dollars for such things as the funeral and material & labor to get the Real Estate on the market. If the true intent of the deceased was that these expenses would have been paid before any splitting of money occurred.

Also through the estate one beneficiary would receive 1% and the other would receive 99%. With the insurance company disbursing these funds, they split it 50 / 50.

Even though the life insurance proceeds are not subject to the deceased creditors claims, the real estate proceeds will be.
 

anteater

Senior Member
Insurance companies make mistakes sometimes, although it is rare that the mistake concerns who gets the proceeds. I've said before: see if the insurance company will confirm whether the policy itself provides for a distribution if the beneficiaries are deceased.

While the estate may be cash-poor now, it appears that there will be cash after the real estate is sold. The brother that paid the funeral expenses and fixing up the real estate can be reimbursed.
 

justalayman

Senior Member
aurie0662;2657926]This whole money issue comes down to the fact that the brother has already paid out of his own pocket several thousands of dollars for such things as the funeral and material & labor to get the Real Estate on the market.
then he files a claim against the estate.

If the true intent of the deceased was that these expenses would have been paid before any splitting of money occurred.
intent does not override actions.

Also through the estate one beneficiary would receive 1% and the other would receive 99%. With the insurance company disbursing these funds, they split it 50 / 50.
we are still trying to figure out if what the insurance company did was justified or not. Until you get the info from the insurance company, I think you are at a standstill.
 

laurie0662

Junior Member
Thank you all for your input, we are in the process of trying to get the needed information from the insurance company. Hopefully this will put this all to rest.
 

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