A life insurance beneficiary is the person who receives the death benefit of a life insurance policy. This person can be designated by the policyholder or it can be determined automatically by state law. When you pass away, your life insurance policy pays out its death benefit to the beneficiary you named in the policy. You can name both primary and secondary beneficiaries in your life insurance policy, and they can be individuals or organizations. Have a question about Life Insurance? Click here. In most cases, life insurance policies contain a clause that allows you to contest the designated beneficiary. If you can prove that a mistake has been made or a fraud was committed for example, your policy may be able to pay out its death benefit to someone else. There are several different circumstances under which beneficiary claims can be contested: This happens when there was no intent to defraud, but there is a mistake in the designation of the beneficiary. This might happen when you write down the name of the wrong person. The court will look at who would receive this money if it were left unclaimed and make payment according to your state's intestacy laws. You can contest the beneficiary designation if you can prove that it was made as the result of fraud or duress. This would be very difficult to do, however. For example, a court might overturn a beneficiary designation because you were under extreme pressure from someone to name them as your beneficiary. If you are the beneficiary of someone's life insurance policy and they contest the designation, you can fight back. For example, if the person who died was married and their spouse contests the designation of a child as the beneficiary, the child might have to go to court to prove that they are the rightful heir. It's important to remember that beneficiary designations can be changed at any time, as long as the policyholder is still alive. If you're not currently married but named a former spouse as your life insurance beneficiary, this will automatically be changed if you get divorced. This does not happen for unmarried couples that separate or get divorced. If you name a minor as your life insurance beneficiary, the money will go into a trust until they reach the age of majority in your state. In most cases, this is 18 years old, but there are some states where it's 21 years old. Step 1: Gather evidence to support your case. This could include documents such as the life insurance policy, letters, emails, or any other evidence that supports your claim. Step 2: File a petition in probate court. You will need to provide the court with your evidence and state your reasons for contesting the beneficiary designation. Step 3: Hearings will be held and both you and the beneficiary will have a chance to present your case. Step 4: The court will make a decision based on the evidence presented. If it agrees that there was a mistake made or fraud was committed, it may overturn the beneficiary designation. Step 5: If you are the beneficiary of a life insurance policy and someone contests your right to the money, you will likely have to go to court to defend yourself. Hire an experienced probate lawyer that can help you present your case in the best light possible. When contesting a life insurance beneficiary, it is important to understand the state and federal laws that may be applicable. For example, the Fraudulent Transfer Act prevents someone from cashing in on a life insurance policy of someone who has died within three years of transferring the policy to them. Another law that might come into play is the Employee Retirement Income Security Act (ERISA). This law protects employee benefits, including life insurance policies. If you are able to prove that someone acted fraudulently in order to receive the money, you may be able to overturn the designation of beneficiary. An experienced probate attorney will be able to help you gather evidence and build a case. In most cases, it is not possible to contest a life insurance beneficiary. When someone contests the right of a beneficiary to receive their policy's death benefit, they will have to go through state or federal laws that protect those rights. If you believe that you were wrongly named as a life insurance beneficiary and are now being contested by another party, do not hesitate to contact an experienced probate attorney. They will be able to review your case and provide you with information regarding state and federal laws that could apply.Life Insurance Beneficiary
Can a Life Insurance Beneficiary Be Contested?
Mistake in the Designation of the Beneficiary
Contest by Insured Person
Contest by Person Named as Beneficiary
When You Separate or Get Divorced
Naming a Minor as Your Beneficiary
Step-by-Step Guide in Contesting a Life Insurance Beneficiary
State and Federal Laws
The Bottom Line
Life Insurance Beneficiary FAQs
A life insurance beneficiary is the individual or individuals who will receive the death benefit from an insurance policy when the insured person passes away. Generally, anyone can be designated as a primary or contingent beneficiary, including family members, friends, financial organizations, charities, and trusts.
Most insurance companies have an online form to update the beneficiary information for a policy, which typically requires the name, address, and date of birth of the new beneficiary. It is important to make sure all beneficiary changes are properly documented and submitted to the insurer.
If no beneficiary is named, the death benefit will be paid to the estate of the insured person, which may result in delays and additional taxes or fees depending on state laws. To ensure that your beneficiaries receive the full amount of their entitlement, it is important to update the beneficiary information for your life insurance policy.
If the designated primary beneficiary passes away before the insured person, any contingent beneficiaries listed in the policy will receive the death benefit instead. If there are no contingent beneficiaries listed, the death benefit will be paid to the estate of the insured person.
Generally, beneficiaries can expect to receive their payments within 30 days of submitting a completed claim form and all required documentation to the insurer. In some cases, however, it may take longer for the insurer to process a claim.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.
