[WSBAPT] FW: Can a small estate affidavit be used to claim a life insurance policy with no living beneficiary designated?

[John J. Sullivan]

Footnote to my prior post, before perusing Douglas’s treatise. If the default is “heirs” you probably need to get their written authorization to claim, and affirm that in the affidavit. 

John J. Sullivan

Sent from my iPhone

> On Jul 27, 2018, at 7:05 PM, Douglas Bratt <djbratt at mbavancouverlaw.com> wrote:
> 
> Eric:
>  
> I was successful in getting payout of life insurance proceeds from a life insurance company, a number of years ago, using the Small Estate Affidavit.
>  
> The actual details escape me as to whether I had to provide a death certificate for the primary beneficiary, but the policy, by its terms, was payable to the estate of the Decedent since the primary beneficiary was no longer alive.  The insurance company did not hesitate in paying out the proceeds to the claiming successor, on behalf of the claiming successor and four other successors in interest (it ended up being a five-way split of the proceeds.)
>  
> I followed the statute, virtually line by line, in terms of what needed to be included in a Small Estate Affidavit.  It was made clear, towards the beginning of the Affidavit, that the value of the life insurance policy payout was less than $100,000.00 and that 40 days had elapsed and that all debts had been paid.
>  
> There were two paragraphs in which the subject of what was being sought (life insurance proceeds) was addressed.  The first was in a paragraph explaining that the other Successors had signed a Consent form for the Claiming Successor to collect the insurance policy proceeds in question. That paragraph read, in part:
>  
> There are other four (4) other Successors.  I have given each of them written notice, by mail, identifying my claim and describing the property claimed.  Each of the four (4) of the other Successors has executed a written Consent form giving his/her approval for me, as claiming Successor, to collect the life insurance proceeds that are due to the Estate of Decedent, per the terms of a Life Insurance Policy issued by Union Fidelity Life Insurance Co., of Ft. Washington, PA (Policy #***************).
>  
> The other paragraph in which the subject was discussed was the final paragraph of the Small Estate Affidavit.  It read as follows:
>  
> Property Claimed.  A description of the personal property claimed, which is subject to probate, is as follows:
>  
> Life insurance proceeds that are due to the Estate of Decedent, per the terms of a Life Insurance Policy issued by Union Fidelity Life Insurance Co., of Ft. Washington, PA (Policy #**************).
>  
> We received the money shortly thereafter and my client, the Claiming Successor, distributed the policy proceeds, per the provisions of the Decedent’s Will.
>  
> It was much easier than a probate, but that was because we had access to all four (4) of the other Successors, each of whom was willing to cooperate, most of them in a timely fashion. 
>  
> As noted in prior posts, there are times when things get complicated enough in a Small Estate Affidavit situation (e.g., one Successor cannot be found, or a Successor refuses to go along with granting permission for the Claiming Successor to claim the whole assets) that it is almost cheaper to go ahead and open a nuisance probate, for the sole purpose of collecting an asset.
>  
> Note – if a formal probate is filed, the Personal Rep can obtain “Letters” and can usually then easily collect the entire policy proceeds, with distribution taking place out of the Estate.  No other procedures carried out in normal probates need be done (Notice to Creditors, Inventory, etc).  The probate is simply a vehicle to collect an asset that is not otherwise conveniently reached. 
>  
> But, I think too many of us quickly go to the Small Estate Affidavit route, assuming that it is cheaper and faster than the filing of a formal probate.
>  
> However, if there is a hold-out (as discussed above), will there be problems when only 80% of the policy proceeds can be claimed, with the other 20% left to be obtained by the hold-out (or missing) Successor, perhaps with his/her own Affidavit of Claiming Successor.  I can imagine a life insurance company being reluctant to pay out 80% of the policy proceeds and be very reluctant to have to hold 20% of the proceeds, or pay that 20% of the proceeds into the Unclaimed Property Office where the company is located, perhaps a couple of years later.  I am sure there are plenty of life insurance companies around that will not appreciate having to go through that hassle and might not cooperate. 
>  
> So, perhaps a filed probate for the sole purpose of collecting the proceeds might be, in the long run, the easier route to take, particularly if the out-of-state life insurance company will not easily recognize the laws of another state viz-a-viz the payout of the policy proceeds.  I have had too many cases where the words, “We need Letters, we need Letters, we need Letters” are repeated like a mantra, probably because Letters of Administration and/or Testamentary are much more indisputable as representing the right of a Personal Rep to collect the proceeds, and the young paper pushers have been told to always demand that the “Letters” be provided before any payout can take place.
>  
> However, I have just re-read your original question, Eric, and you reference “the surviving family member,” using singular, as opposed to plural “family members.”  If true, in such an instance, no notice need be given to other successors, and no permission forms need to be signed by such other successors, and it should work quite easily.  But, it I would think if multiple named beneficiaries have died off, the chances of there being only ONE family member who will take all of the proceeds is rather slim, given the fact that all of those deceased named beneficiaries most probably produced a number of children over the years, who, in turn, probably also produced many more children.
>  
> In summary, I think your biggest problem is not that you are collecting life insurance proceeds instead of bank account deposited funds.  The bigger problem is the notice problem in the Small Estate Affidavit, and/or the difficulty in trying to get “written authority” from “all other successors” in order to be able to obtain ALL of the life insurance policy proceeds.
>  
> I brought issues about the Small Estate Affidavit process up in April, 2018, on the listserv and Eric Nelsen used his excellent analytical skills in a responsive email to me.  If anyone is interested in being directed to this string, it was started by my email to the listserv, dated April 2, 2018, mid-afternoon, followed by Eric’s response later on that date, and completed by my response to him at 6:43 PM (almost exactly the same time that I am sending this post on this Friday evening – what’s wrong with this picture?!!)   
>  
> Good luck.
>  
> And a fine weekend to all of you in listserv-land.
>  
> Regards,
>  
> Doug   
>  
> Douglas J. Bratt
> Lawyer
>  
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> From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Derek Jensen
> Sent: Friday, July 27, 2018 12:59 PM
> To: WSBA Probate & Trust Listserv
> Subject: Re: [WSBAPT] Can a small estate affidavit be used to claim a life insurance policy with no living beneficiary designated?
>  
> You can try, but I wouldn’t be surprised if the insurance company distributed the funds to unclaimed property and you end up making your claim there.
>  
> Sincerely,
>  
> Derek W. Jensen, JD, LLM
> Managing Attorney
>  
>  
> From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Eric Reutter
> Sent: Friday, July 27, 2018 12:27 PM
> To: wsbapt at lists.wsbarppt.com
> Subject: [WSBAPT] Can a small estate affidavit be used to claim a life insurance policy with no living beneficiary designated?
>  
> Hi all,
>  
> I encountered an issue for which I have not yet found a good answer. 
>  
> Simple and common situation: decedent passed away with a small (well under $100,000) life insurance policy for which no living beneficiary was named (all beneficiaries listed had predeceased the decedent). I haven't been given the policy yet, but I am making the assumption that the policy will say that the death benefit is now payable to the estate by default.
>  
> My question is, assuming all the threshold criteria of the small estate affidavit are met (under 100k, debts disposed of, etc...) can the small estate affidavit be presented to the life insurance company as authority for them to distribute to the surviving family member? (Thereby avoiding the need to open probate for just this small insurance benefit)
>  
> I am familiar with this small estate procedure when it comes to a bank account, but less so with a life insurance contract that likely defaults to being payable to the estate if no living beneficiary is named.
>  
> If anyone has experience using a small estate affidavit with a life insurance death benefit, I would be very grateful to hear you thoughts!
>  
> Best regards, 
>  
> Eric Reutter
> J.D., LL.M. Taxation
> Lake Hills Estate Planning, PLLC 
> 
> 10900 NE 8th Street, Suite 1000
> 
> Bellevue, WA 98004
> www.lakehillsestateplanning.com
> (425) 298-5895
>  
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