Beneficiary Designation Mistake

[ryobidon]

Prior to 04.24.2013, my friend's and his wife's beneficiary designation forms
were as follows.

My Friend
Primary Beneficiary: His Wife
Contingent Beneficiary: None

His Wife
Primary Beneficiary: My Friend
Contingent Beneficiary: None

They realized that if something were to happen to both of them at the same time that they didn't have a designation listed for that type of event.

They both agreed to make both of the girls, his step-daughters, 50/50 recipients of both of their policies. This would have paid each over 100K if they both were to die.

They both indicated the same designation when making these changes
and thought these changes were going to be in addition to the original
designations made.

The changes made were as follows.

My Friend
Primary Beneficiary: Both Daughters/Step-Daughters
Contingent Beneficiary: None

His Wife
Primary Beneficiary: Both Daughters/Step-Daughters
Contingent Beneficiary: None

These changes were not made in addition to the original designations,
they replaced the original designations.

If my friend were to die, his wife would not have received the benefit and if
his wife died, my friend would not receive the benefit. This is obviously not
what they intended.

Their intentions were as follows.

My Friend
Primary Beneficiary: His Wife
Contingent Beneficiary: Both Daughters/Step-Daughters

His Wife
Primary Beneficiary: My Friend
Contingent Beneficiary: Both Daughters/Step-Daughters

His wife just recently died, so my friend called the insurance company to inquire about the funds to pay off his 100K home balance, burial expenses, medical bills, and car loan.

He was told that he was not the beneficiary and that they could not tell him who was.

Going through his lock box, we found a letter that he had received from the insurance company indicating the changes. He was in shock when the mistake was explained to him.

The step-daughters, who have financials issues have decided not to do the right thing by turning over the funds to him.

He is in his mid fifties and now owes over 120K on a single income. Sad story!

 

[STIBROKER]

were you the agent........

Prior to 04.24.2013, my friend's and his wife's beneficiary designation forms
were as follows.

My Friend
Primary Beneficiary: His Wife
Contingent Beneficiary: None

His Wife
Primary Beneficiary: My Friend
Contingent Beneficiary: None

They realized that if something were to happen to both of them at the same time that they didn't have a designation listed for that type of event.

They both agreed to make both of the girls, his step-daughters, 50/50 recipients of both of their policies. This would have paid each over 100K if they both were to die.

They both indicated the same designation when making these changes
and thought these changes were going to be in addition to the original
designations made.

The changes made were as follows.

My Friend
Primary Beneficiary: Both Daughters/Step-Daughters
Contingent Beneficiary: None

His Wife
Primary Beneficiary: Both Daughters/Step-Daughters
Contingent Beneficiary: None

These changes were not made in addition to the original designations,
they replaced the original designations.

If my friend were to die, his wife would not have received the benefit and if
his wife died, my friend would not receive the benefit. This is obviously not
what they intended.

Their intentions were as follows.

My Friend
Primary Beneficiary: His Wife
Contingent Beneficiary: Both Daughters/Step-Daughters

His Wife
Primary Beneficiary: My Friend
Contingent Beneficiary: Both Daughters/Step-Daughters

His wife just recently died, so my friend called the insurance company to inquire about the funds to pay off his 100K home balance, burial expenses, medical bills, and car loan.

He was told that he was not the beneficiary and that they could not tell him who was.

Going through his lock box, we found a letter that he had received from the insurance company indicating the changes. He was in shock when the mistake was explained to him.

The step-daughters, who have financials issues have decided not to do the right thing by turning over the funds to him.

He is in his mid fifties and now owes over 120K on a single income. Sad story!

 

[ryobidon]

No, friends of mine.

----------

Their insurance agent they talked to about the change has retired.

 

[DHK]

Knowing these stories just proves that part of our job as agents/advisors is to help our clients review their beneficiary designations on a regular basis. To not do so, can really screw things up so that the things they WANT to have happen... might not happen the way they wanted.

 

[STIBROKER]

No, friends of mine.

----------

Their insurance agent they talked to about the change has retired.

then he should sue the agent......what agent would not warn the policy holder when the app was written to pick a contingent beni.....and really warn about leaving minors as beni.....you always advise on some one that can be trusted to give the kids the money when they need it and are responsible.......

 

[DHK]

You can't sue or complain. It wouldn't hold up. The agent could only be sued based on the ORIGINAL application - where each was listed as the primary beneficiary for the other's policy - which is perfectly fine. Sure, they SHOULD'VE assigned a contingent beneficiary on both policies, but they didn't.

They changed/updated the beneficiary (I assume) WITHOUT professional guidance or assistance.

This is on them.

----------

In fact, if they would've just LEFT IT ALONE, the proceeds would've been passed on via probate court. It would've passed to surviving spouses first, then children.

By updating their beneficiary form, they made it worse! Sure, probate has costs, but the net proceeds would've gone to where they should've gone.

 

[STIBROKER]

You can't sue or complain.

unless the same agent helped them with the change......which he should have warned about the exposure to the surviving spouse.......

 

[Newby]

That's a horrible story and they had a numbskull for an agent. That would be hard if not impossible to fix because there is no way for a court to determine if that is what the deceased actually wanted.

In working closely with funeral homes I've seen some real bad situations concerning beneficiaries through the years. The most common one is thinking that changing your Will would change insurance payouts. People get divorced and remarried and think that the insurance company will just pay the new wife. Nope. Sometimes the ex-wife from 30-years ago is the one person on Earth the deceased hated the worst. And they loved their new wife of 25-years. But they failed to change the beneficiaries.

Another common problem is from listing no beneficiary or "the estate" as beneficiary. That eliminates many of the advantages of life insurance in the first place one of which is bypassing probate. And a policy that goes through the estate is useless if they want to use it at a funeral home. Not gonna happen.

Hopefully the majority of agents fill out correct beneficiary information and contingents in most cases.

 

[LGilmore]

Have a strong feeling they didn't use an agent for this change. This sounds consumer driven. I think they didn't ask for help.

 

[thomasm]

Hopefully the majority of agents fill out correct beneficiary information and contingents in most cases.

This is got me thinking I need to take the time to call my older FE book and make sure their beneficiary info is up to date.

That is if I can get a hold of them.

With some, I'm going to have to skip trace, because even though they're still on the books, they have since moved, without updating me, or the insurance company with the new address, and the phone numbers I have on file are disconnected.