If you believe that you have been cheated out of a life Insurance pay-out, you may be able to challenge the Beneficiary designation. However, this is difficult to do; if the current beneficiary is named on the policy, you must prove that they either fraudulently added themselves, took advantage of a relative’s diminished capacity to have themselves added, or are misrepresenting their identity to lay claim to an insurance benefit.
If no living beneficiary exists, or there are multiple paternity claims suddenly made, a beneficiary dispute can become a long and drawn-out process, requiring years of legal wrangling.
How Beneficiary Designations Should WorkNormally, a life insurance policy is written naming either specific individuals or branches of the family (per stirpes) as Beneficiaries. A policy must always name at least a primary beneficiary, such as a wife, children, or a trust. There is an option to designate secondary beneficiaries, who will receive the death benefit if the primary beneficiary expires before the policyholder does. If no secondary beneficiary is listed and the primary beneficiary is already deceased, policies either follow a contractual line of succession or are turned over in trust.
To complicate matters, beneficiaries can be set as either revocable or irrevocable. If a beneficiary is set as revocable, the policyholder can remove them at any time, and has no duty to notify the former beneficiary. That can come as a nasty surprise if you expected to see a windfall when an older relative passes away, only to find out that they took you off as a beneficiary years ago.
How Beneficiary Designations Go WrongMost adults don’t seriously consider life insurance until they have their first child. At that point, most people will take out insurance to cover their spouse’s and children's’ bills for a few years. The beneficiary is often set as the spouse and children.
Once this is done, barring any health scares or close tangles with death, many people don’t think much about life insurance as anything but a tax write-off until they begin nearing retirement age. Along the way, there are often oversights. More children are born. Nephews come along, or even grandchildren. Spouses divorce or are windowed. Yet that twenty-year-old policy has the same beneficiaries the policyholder picked in their twenties.
By the time a person reaches their twilight years, they may look at a policy--especially a whole life policy that has been built into a valuable asset--and realize the original scheme of beneficiaries doesn’t match with their current relationships. Primary beneficiaries may be dead, and secondary beneficiaries may be disowned.
Legitimate Beneficiary ChangesTowards the end of life, many people will sit down and rearrange their legacy to benefit the people who stuck by them to the end. They may set aside money for a favored granddaughter who was always with them in the hospital and strike an alcoholic son from their will. This routine estate planning often involves removing and adding beneficiaries to a life insurance policy.
As long as they do it of their own free will, a policyholder can leave money to whoever or whatever cause they want; no-one has a right to demand or forbid a change of revocable beneficiaries. So when the policyholder passes, relatives begin to joust and jostle each other for claims to the death benefit.
Quite often there is a legitimate concern that a certain family member or caregiver tricked the deceased into changing their beneficiaries. Other times it is greed and jealousy that even in death, grandpa had a favorite.
How to Contest or Dispute BeneficiariesContesting or disputing life insurance beneficiaries can be a difficult process. It’s definitely not something that can be done on your own; the designation of a beneficiary is a firm legal endorsement of a deceased’s intentions; since they are not available to answer questions, you will need very solid evidence of fraud or deception.
The first step in the process of contesting a life insurance beneficiary is establishing why you believe you are the proper beneficiary. Maybe you will claim you were told, verbally, that you would receive an inheritance. That’s a weak claim, but it’s somewhere to start.
Maybe you have an older version of the deceased’s life insurance policy listing you as a beneficiary, and this doesn’t match up with what the insurance company has on file. Most likely you were removed and not notified, but this would be a starting point to claim that a caregiver or other relative took advantage of or tricked a sickly relative into making them the sole beneficiary.
Fraud and LiesThere is no guarantee that the relatives who find the deceased will be the people listed on the insurance policy or will. With thousands of dollars on the line, it is not unheard of for greedy relatives to attempt to change the listed beneficiary after the policyholder is clearly incapacitated or on life support.
Since the policyholder is the only person who can legally change beneficiaries; typically, not even a relative with power of attorney may change insurance beneficiaries except by the express wishes of the policyholder.
If you suspect that there is any kind of fraud or misrepresentation related to the designation of life-insurance beneficiaries, you should contact a local life insurance lawyer immediately.
Veronica Baxter is a freelance writer and legal assistant operating out of the greater Philadelphia area.