FEGLI, different beneficiary from designated, both in agreement, how get FEGLI to pay

[leoneta]

State of Washington. My significant other had FEGLI insurance, a substantial policy. He designated a brother as beneficiary on his papers (B-1), but made it clear in a will, a letter to his brother, and to his family, that he wanted me (B-2) to receive the money. He had what he felt was a valid reason for not directly naming me as beneficiary. The family and the brother are in total agreement that the money should go to me. Problem is, FEGLI rules state that the designated beneficiary cannot be changed. Also, the FEGLI rules preempt state law.

Because he became concerned about tax implications, my Significant Other tried making the change to the designation of beneficiary before death, but was unable to due to disability.

In Washington, with sufficient evidence that deceased intended policy to go to other than the beneficiary designated on the form, caselaw allows the insurance to be paid to the second beneficiary. Is there a procedure whereby we can have FEGLI pay the insurance directly to me (B-2)? For instance, if B-1 signs an affidavit acknowledging that the money should go to me? Or what?

The real problem here is gift tax, not a dispute as to who gets the money. There is no dispute among the parties as to whom the money should go. Our big question is, does FEGLI allow a procedure whereby the person designated on the form can specify that the money should go to the second person? Needless to say, FEGLI and OPM (Office of Personnel Management) do not make it generally known what to do in such a case, because it denies the IRS their cut from gift tax.

Any help out there?

Leoneta

 

[ALawyer]

Some good news and some bad.

NO it is NOT because FEGLI or OPM wants the IRS to have potential gift tax receipts or force him to use up the unifed credit. They are oblivious to that. And MetLife administers the program for OPM, and it could care less about tax benefits. It is that they want to have a program that is uniformly administered and hassle free so hundreds of others do not come in and say in their cases "but he wanted me to have it".

This is one where a decent lawyer may be able to mount an argument that you should have it that FEGLI will buy, or perhaps you and the named beneficiary could get FEGLI to interplead -- put the proceeds into court and let the claimants make belive they are going to fight it out and then the claimants quickly settle it, sort of with a wink.

One more thought -- you could also possibly claim that brother B-1 was to be holding the proceeds as trustee for you, and then when he gives them to you there is no gift tax implications, and you indemnify him should there ever be a gift tax assessed.

[Edited by ALawyer on 07-02-2001 at 01:31 AM]