Life Insurance Disclaimer

[harrylime]

A disclaimer would work the same as it does in a probate case, or a trust, or an IRA... The disclaimant is treated as having predeceased. If there were contingent beneficiaries, the contingents would be eligible to receive the proceeds.

I remember a case in Virginia that dealt with an insurance disclaimer and the primary beneficiary's creditors. The primary disclaimed and the primary's children were the contingents. Primary owed some creditors and disclaimed. Creditors attacked the disclaimer. Creditors lost. but that is VA. Mileage may vary in other states.

[jk]

thanks harrylime.

[Betty3]

I don't know about the rest of you, but I have never seen a policy where the primary beneficiary cannot disclaim.

The co. I worked for & our reinsurers would not accept a disclaimer. Benefits were paid to the primary bene. The primary bene could then do with them as he/she wished - such as give the proceeds away if he/she wanted. (Could be "disclaimed" after paid out)

betty, IF there is/are a contingent beneficiary (OP mentioned there might be but doesn't know) and the primary refuses to accept the bene's, what happens to the money? Does it go to the contingent bene's or does if simply set in the insurers coffers until it eventually escheats to the state?

At our co. primary were always paid proceeds if living - if not, then to contingent if any & living. If not, then generally to estate of insured. We did not let primary disclaim - he/she could after they received them. Once paid out, they could do with proceeds as they wished.

The co. I worked for & our reinsurers would not accept a disclaimer. Benefits were paid to the primary bene. The primary bene could then do with them as he/she wished - such as give the proceeds away if he/she wanted.



At our co. primary were always paid proceeds if living - if not, then to contingent if any & living. If not, then generally to estate of insured. We did not let primary disclaim - he/she could after they received them. Once paid out, they could do with proceeds as they wished.

Again, OP can certainly talk to the ins. co. or an attorney. I only know what our co. did & the cos. we reinsured with & what was in our life ins. law book & on our life ins. tests we had to take.

As to the "potential creditors", in at least some states, the proceeds would be safe. I do not know about Indiana and I doubt that anybody here is inclined to try to research that question.

This is what In. says about creditors & insurance: exempt from creditors - Fraternal society benefits. Life insurance, if group term policy, or if beneficiary is insured's spouse or dependent, or if a clause in the policy prohibits payments to creditors. Accident proceeds.

[Betty3]

Ok, after doing some google searching when I had the time, it seems some companies if not contrary to policy provisions will allow a bene to disclaim benefits. (not what our co. & reinsures allowed though & what I was "taught") The bene should talk to the ins. co. & review policy provisions to start with to see if it is allowed. (maybe, maybe not)

[Mr. Knowitall]

If we assume that the children are the contingent beneficiaries, can she disclaim the proceeds to the detriment of her creditors?

You're a lawyer, right? Then you know that when it comes to policies of insurance, and what you can do under them, you can assume two things, the first of which is "jack". Assuming gets you into trouble. What you need to do is get a copy of the policy and beneficiary designations, and read them. I'm aware of a case in which the beneficiary waived her rights, assuming that there were no contingent beneficiaries and that the insurance would then go into the decedent's estate - except after her waiver a contingent beneficiary was discovered and that person got the money. Assuming is dangerous.

If there is no contingent beneficiary, is the benefit paid to the policy owner or husband's estate?

That's a matter of contract. See, e.g., Brooks v. Thompson, 521 SW 2d 563 (1975) (discussing an insurance policy that, if no beneficiaries qualify or survive, provides that the beneficial interest reverts to the owner).

Why hasn't the client called the insurance company to find out if she can disclaim and what happens if she can?

That would be an obvious first step, but as I previously indicated I would want to confirm anything I was told based upon the written documents.

jk, the ins. co. I worked for (& the cos. we reinsured with - all major cos.) would not allow a change of bene once the insured died.

As a matter of contract.

4) The first question is whether the the primary beneficiary can disclaim.

That's a question we cannot answer without reading the policy.

5) The secondary question is, if the primary beneficiary disclaims, can the primary beneficiary's "potential creditors" (whatever that is) attack the disclaimer.

One of the questions was, if the beneficiary declines and there are no contingent beneficiaries, does the money go to the decedent's estate or to the owner of the policy. Again a matter of contract.

As for attacks on a disclaimer, I don't see anything helpful in Tennessee's statutes or the recent case law I can search; but I think our OP is a lawyer so he should know how to research those materials himself.

I remember a case in Virginia that dealt with an insurance disclaimer and the primary beneficiary's creditors.

Abbott v Willey. The creditors attempted to attack the disclaimer as a fraudulent conveyance. It was decided under state statute, so it has limited relevance to other states, but I'm not aware of any similar case law from other states.