Contested beneficiary

[dct452]

What is the name of your state? Case is in Texas.

I recently submitted an inquiry here (under "Beneficiary Contested") and received some valuable information for which I am very grateful. However, I now have more detailed information that I would like to get some input on if I could please. I'll try to be as concise and accurate as I can.
Here's the situation: My brother died recently in Texas (a community property state). Two years ago, during his marriage, he took out a $250,000. life insurance policy with his wife as sole beneficiary. A few months later, he and his wife were having serious problems and were headed towards divorce. He sent out an email to family and friends in August 2003 announcing they would be filing for divorce soon. (they never did file) In November 2003 he had an industrial accident that eventually led to his death in Feb. 2005. From November 2003 to Feb. 2005, according to my brother, in spite of him dealing with serious symptoms from the accident, his wife treated him very disrespectfully, she acted like she was single, staying out late every night while he was home alone trying to take care of himself. Again, according to him, she treated him like he was in inconvenience to her and she was just waiting for him to die. It was during this time and for these reasons that he requested a change in the beneficiary on his life insurance policy. That change was granted by the insurance company in Oct. 2004. He took his wife off and replaced her with me and another brother. (incidentally, he had a VERY sound mind at the time of this request) It wasn't until after he died that his wife discovered the beneficiary change. Now, she and her attorney are challenging this change in beneficiary, based on Texas being a community property state. They are claiming that because of this, and the following assertions, that she is entitled to all of her half, and half of my deceased brother's half, giving her a total of 75%.

Here are her attorney's assertions, and my questions:

*He said that in Texas, the assumed agreement is that the surviving spouse has a right to ALL of the deceased life insurance benefits.
*He said that there is an assumption of fraud for my brother to change the
beneficiary on his life insurance policy, since in a community property state the spouse is entitled to the proceeds of his life insurance policy.
*He said it is presumed fraudulent for anyone else other than the spouse to be listed as a life insurance beneficiary in community property state.
*He said that (according to her) the premiums were paid out of a joint checking account (thereby paid with community property funds), and so the proceeds are also community property regardless of who the named beneficiary is.
*Based on his logic, her attorney has requested that we sign an agreement that he has sent us, that would give my sister in law 75% of the proceeds (constituting all of her half and half of my deceased brother's half), with the other 25% being apportioned between the two beneficiaries my brother had named on the beneficiary change request. (no, we have not signed these agreements)

My questions:

1) Are the benefits paid from a life insurance policy automatically considered community property of a marriage in a community property state?
2) Is her attorney correct about a spouse having a right to all the benefits of a life insurance policy in a community property state? And, does paying the premiums for this policy out of a joint account automatically give her more rights to the benefits?
3) Is he correct that, again in a community property state, it is an assumption of fraud for a policy holder to change the beneficiary from his wife to his family members?
4) How do I go about researching and finding any court decision precedents in Texas that may help me in my negotiations?
5) Who would the courts see as having more rights in this case; a surviving spouse who, based on the wishes of the deceased policy holder was not listed as a beneficiary, but who has community property rights; or the legal beneficiaries of the policy as per the wishes of a dying man?
6) In lieu of the fact that he wanted her to receive NO benefits from his life insurance because of her treatment of him, what would be a fair percentage to offer her, and remain steadfast in that offer?

I'm sorry for the length of this correspondence. I tried to make it concise. This may not be considered a huge amount of money, but my brother and I were one year apart in age, and very close our whole lives. Honoring his wishes is extremely important to me. Any input or suggestions are greatly appreciated. Thank you.

 

[BelizeBreeze]

Generally, the proceeds of life insurance purchased with community funds are community property. Brown v. Lee, 371 S.W.2d 694, 696 (Tex. 1963); Street v. Skipper, 887 S.W.2d 78, 81 (Tex. App.-Fort Worth 1994, writ denied). However, this rule does not automatically dictate that the proceeds be given to the surviving spouse. Street, 887 S.W.2d at 81.

The insured may name as a beneficiary of a community-owned insurance policy a third party or the decedent's estate. Tex. Ins. Code §3.49-3; *fn5 Street, 887 S.W.2d at 81. The designation of a life insurance beneficiary is the equivalent of a gift in the absence of consideration from the beneficiary to the insured. Givens v. Girard Life Ins. Co., 480 S.W.2d 421, 424 (Tex. App.-Dallas 1972, writ ref'd n.r.e.).

Whether the gift should be allowed to stand is determined by whether the designation of a beneficiary other than the surviving spouse was made in the absence of fraud. Street, 887 S.W.2d at 81; Ashmore v. Carter, 716 S.W.2d 171, 174 (Tex. App.-Beaumont 1986, no writ).

Courts consider several factors in determining the fairness of a gift, including the size of the gift in relation to the total size of the community estate; the adequacy of the estate remaining to support the wife, the gift notwithstanding; the relationship of the donor to the donee; and whether special circumstances existed to justify the gift. Street, 887 S.W.2d at 81; Givens, 480 S.W.2d at 426.

The donor-spouse or the donee seeking to sustain the gift has the burden of proving that the gratuitous transfer of community assets was fair. Murphy v. Metropolitan Life Ins. Co., 498 S.W.2d 278, 282 (Tex. App.-Houston [14th Dist.] 1973, writ ref'd n.r.e.).

Theses are just some of the issues you'll be dealing with in the near future. And if I haven't told you before, I will do so now, although you can study the issues here Barnett v. Barnett, 985 S.W.2d 520 (Tex.App. Dist.1 12/21/1998)
you seriously need an attorney to start representing your interests.

DO NOT speak with this attorney or the wife again.