designated beneficiary

[haygn00]

Michigan

my father past recently. he named me and my brother as the beneficiaries. but when we went to the funeral home and they called the insurance company to verify they stated his ex-wife was listed. after some investigating we found out that my father's company did not update the insurance company with the updated designated beneficiary info. so now the ex-wife is contesting it and the insurance company will not pay the benefits unless we reach an agreement or the issue goes to court. my question is why can't the insurance company pay the money to me and my brother since we are listed as the beneficiaries and they have the documents stating that?

 

[ALawyer]

The reason is that what is clear to YOU is NOT at all clear to the insurance company and IT DOES NOT WANT TO RISK HAVING TO PAY TWICE. As the rights to the money are at issue, the risk is a real one.

Suppose it pays you and then the wife sues the insurance company. She might win -- various possible grounds may include community property rights (depending on the state), similar rights in other states, a "contract" or pre-nup with your dad as to the insurance, lack of capacity on his part at the time of change, "undue influence", irregularities in the records, etc.

So what it does is Interplead you all, placing the proceeds with the court (it really doesn't care WHO gets it, it is merely a stakeholder) and letting it decide who the rightful beneficiary is, assuming you don't settle.
Getting a lawyer, who knows insurance, to at least assess your chances is critical and then it is negotiation as each of you loses as the legal bills mount. Not to mention the bitterness that results.