Father has ex-girlfriend named as beneficiary in a life insurance policy

[Silas1066]

I am in Illinois.

My father modified his trust recently, and after developing dementia, my sister had to take PoA for medical and financial. Upon doing that, she noticed that within his trust was a life insurance policy for $600,000 that lists his ex-girlfriend as a beneficiary. But the strange part is that within the trust, it says that this girlfriend is responsible for all premium payments.

So we have an ex-girlfriend with no family connection or "insurable interest" paying premiums on a life policy for my father. To make it even weirder, he put her on this policy as beneficiary AFTER they broke up (she threw him out--they have no children together). Because he is demented and paranoid, we can't get a straight answer from him as to why he did this.

Is this even permissible under Illinois law? Do we have any recourse?

 

[xylene]

Recourse for what? What do you want to do?

 

[Ohiogal]

I am in Illinois.

My father modified his trust recently, and after developing dementia, my sister had to take PoA for medical and financial. Upon doing that, she noticed that within his trust was a life insurance policy for $600,000 that lists his ex-girlfriend as a beneficiary. But the strange part is that within the trust, it says that this girlfriend is responsible for all premium payments.

So we have an ex-girlfriend with no family connection or "insurable interest" paying premiums on a life policy for my father. To make it even weirder, he put her on this policy as beneficiary AFTER they broke up (she threw him out--they have no children together). Because he is demented and paranoid, we can't get a straight answer from him as to why he did this.

Is this even permissible under Illinois law? Do we have any recourse?

A life insurance falls outside the state. What evidence do you have that the ex-girlfriend who is beneficiary did anything untoward?

 

[adjusterjack]

A life insurance falls outside the state

Outside the estate.

So we have an ex-girlfriend with no family connection or "insurable interest" paying premiums on a life policy for my father

With life insurance the insurable interest is required when the policy is taken out, not at time of death.

When he took out the policy he must have been able to convince the insurance company that he had good reason for making her the beneficiary. "Girlfriend" on the form would have been enough.

What is the inception date of the policy (the actual date as in --/--/----)?

And when, exactly, was he first medically diagnosed with dementia?

Oh, is the trust the owner of the policy or is the girlfriend? Read the policy it should differentiate between owner and insured if the insured is not also the owner.

( I have a reason for the questions and the specificity.)

 

[justalayman]

Outside the estate.



With life insurance the insurable interest is required when the policy is taken out, not at time of death.

When he took out the policy he must have been able to convince the insurance company that he had good reason for making her the beneficiary. "Girlfriend" on the form would have been enough.

What is the inception date of the policy (the actual date as in --/--/----)?

And when, exactly, was he first medically diagnosed with dementia?

Oh, is the trust the owner of the policy or is the girlfriend? Read the policy it should differentiate between owner and insured if the insured is not also the owner.

( I have a reason for the questions and the specificity.)

If the insured purchased the policy, there is no requirement the beneficiary have an insurable interest in the insured. The requirement for an insurable interest is imposed upon the purchaser ofmthe policy.

I can purchase a policy and make the Dali llama the beneficiary if I choose. It is accepted I have an insurable interest in my own life. It doesn’t matter who I designate as beneficiary.

 

[adjusterjack]

If the insured purchased the policy, there is no requirement the beneficiary have an insurable interest in the insured. The requirement for an insurable interest is imposed upon the purchaser ofmthe policy.

We know that the gf is paying the premiums but we don't know if the gf is "owner" of the policy.

I can purchase a policy and make the Dali llama the beneficiary if I choose. It is accepted I have an insurable interest in my own life. It doesn’t matter who I designate as beneficiary.

True, but if you purchased a policy on the Dalai Lama and made yourself the beneficiary it would be an issue.

By the way,

"The one-l lama,
He's a priest.
The two-l llama,
He's a beast."

(Ogden Nash)

 

[justalayman]

We know that the gf is paying the premiums but we don't know if the gf is "owner" of the policy.



True, but if you purchased a policy on the Dalai Lama and made yourself the beneficiary it would be an issue.

By the way,

"The one-l lama,
He's a priest.
The two-l llama,
He's a beast."

(Ogden Nash)

Thanks for the spelling lessson. It is cute.


I think the statement

He put her on the policy as beneficiary after the breakup


Pretty much confirms he has purchased the policy. The owner is the only person able to designate beneficiaries.

 

[Silas1066]

My father took out the policy originally, and had a current girlfriend as the beneficiary. He later changed it to the old girlfriend (4 months before being formally diagnosed with vascular dementia).

The only thing that seems very strange to me is the requirement within the trust that the old girlfriend pay the premiums --payment of premiums is something the owner of a policy is responsible for. She has been paying them for the last 6 months.

And the policy is listed as an asset within the trust (600k), even though it doesn't affect the tax liability.

 

[cbg]

My father was a big fan of Ogden Nash.

And I will bet a silk pajama
There isn't any three-l lllama.

(the author's attention has been drawn to a type of conflagration known as a three-alarmer. Pooh.)

 

[justalayman]

My father took out the policy originally, and had a current girlfriend as the beneficiary. He later changed it to the old girlfriend (4 months before being formally diagnosed with vascular dementia).

The only thing that seems very strange to me is the requirement within the trust that the old girlfriend pay the premiums --payment of premiums is something the owner of a policy is responsible for. She has been paying them for the last 6 months.

And the policy is listed as an asset within the trust (600k), even though it doesn't affect the tax liability.

Yes that is strange but even more so, what happens if she fails to pay the premiums? The trust has no power to enforce the directive that she pay the premiums.

Regardless, I’m not sure of what your question is.

 

[Zigner]

The only thing that seems very strange to me is the requirement within the trust that the old girlfriend pay the premiums --payment of premiums is something the owner of a policy is responsible for. She has been paying them for the last 6 months.

I don't believe it's strange at all...if she wants the money once he passes, then she needs to pay the premiums now.

And the policy is listed as an asset within the trust (600k), even though it doesn't affect the tax liability.

Nothing strange about that either.

 

[Taxing Matters]

And the policy is listed as an asset within the trust (600k), even though it doesn't affect the tax liability.

The life insurance policy is an asset if it has some investment component, like whole life policies do, that gives it a cash value or other value during his lifetime. Is this strictly life insurance with no investment features (e.g. straight term insurance) or is this a policy that has some kind of investment aspect to it?

 

[Dandy Don]

Please answer adjusterjack's questions about the inception date of the policy and approximately WHEN was he medically diagnosed dementia, as those are critically important.

Maybe he was trying to lessen his financial responsibility to make the monthly payments by asking her to make the payments instead, since she may eventually receive the financial benefit of a payout from this policy.

 

[Silas1066]

He changed his trust in July of this year, which changed the beneficiary on the insurance policy. He was medically diagnosed with vascular dementia in early October (he had symptoms before this, but that is when MRIs were performed, and he was deemed incompetent).

The policy does not pay anything out to my father (like an annuity). As far as I know, it is a simple policy that pays out when he dies to the beneficiary.

Our lawyer, upon reading the trust, and looking at the policy, thought it was very strange that she was paying the premiums, and was a beneficiary, even though she has no relationship with my father or his family. He thought it was "problematic", but I haven't talked to him in detail about it.

 

[Zigner]

He changed his trust in July of this year, which changed the beneficiary on the insurance policy. He was medically diagnosed with vascular dementia in early October (he had symptoms before this, but that is when MRIs were performed, and he was deemed incompetent).

Changing a trust does not change the beneficiary of an insurance policy.

The policy does not pay anything out to my father (like an annuity). As far as I know, it is a simple policy that pays out when he dies to the beneficiary.

Our lawyer, upon reading the trust, and looking at the policy, thought it was very strange that she was paying the premiums, and was a beneficiary, even though she has no relationship with my father or his family. He thought it was "problematic", but I haven't talked to him in detail about it.

Frankly, I don't see any problem with it. He obviously wanted her to have the money so long as she made the payments. She doesn't HAVE to make the payments.