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Beneficiary designations — for life insurance or retirement plans, for example — are an often overlooked aspect of estate planning. A change in life circumstances may suggest a need to change those beneficiaries. Beneficiary designations can be the source of estate litigation, as a recent case demonstrates.
Greg and Rebecca Lee had been married for ten years when Rebecca sought a divorce. In the divorce proceedings, she asked for and received $2,000 monthly maintenance and a lump sum of $35,384. To secure the payments, Greg agreed to leave Rebecca as the beneficiary of his $150,000 life insurance policy
But, he didn’t do that. Greg changed the beneficiary to his daughter, Natasha. When he died two years after the divorce was finalized, Greg was current on his maintenance payments but still owed some $32,000 on the lump sum.
Both Rebecca and Natasha claimed the insurance proceeds, and the inevitable lawsuit began. The insurance company deposited the proceeds with the court and was released from the case. Natasha offered to pay Rebecca the $32,000 still owed to her, but Rebecca believed the terms of the divorce decree meant she should get all of the $150,000 insurance proceeds, because she should have been the sole beneficiary on the policy.
Examining the terms of the decree carefully, the trial court concluded that Natasha had the better argument. The insurance policy was meant to guarantee the payments to Rebecca, not to provide a bonus in the event of Ronald’s premature death. The Washington appellate court now agreed with this judgment.
Do you have questions concerning wealth management? If so, send them over to Adam Cox, JD, MBA; he’d be happy to help.
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