[WSBAPT] Life insurance default beneficiary

Fri May 12 09:16:14 PDT 2023

Dalynne:

I can't say I've researched the subject, but intuitively I don't see how a
fiduciary can be kin to a principal. Conceptually, a guardian stands in the
place of the ward, but has no kinship as a parent does. 

That's just my two cents. But what caught my eye about your post is that I
had a case involving an IRA with a default provision that left it to the
intestate estate of the decedent if there was no designated beneficiary. In
my case the decedent had no descendants, had been alienated from parents and
siblings and extended family on the East Coast for over thirty years. He had
recently retired, and somehow married a Romanian woman in Romania, who never
joined him here. After he died I had to work with the M.E. at Harborview to
deal with his remains. It was at that point I learned that the wife had
divorced him in a procedure in Romania (that would have been very burdensome
and costly to secure the documentation on). The IRA custodian would not pay
it out when we argued the ex-wife, as designated beneficiary, was removed by
reason of RCW 11.07.010. 

IMHO it is problematic for financial institutions to choose a default
provision like yours or mine that is not the probate estate. There are just
too many variations for them to imagine what the "right" result should be.
In my case it meant the creditors are out of luck. My decedent had quite a
bit of back taxes owed to the IRS. In your case perhaps, if the "partner"
was in a CIR with the decedent, proceeds paid to the probate estate would be
available to the "partner" because it represented an increase in the value
of an asset (the life insurance policy) during the relationship. 

In the end, the result in either case is likely to defer realization of the
financial institution's liability. The funds sit on their books for years
after death. I am fairly certain they eventually get turned over to the
state as unclaimed property and eventually escheat if not claimed. (Which
raises another issue. In my case the IRA custodian is in FL. Do they pay
into the unclaimed property system of FL or WA? I think the right answer
should be WA, but am not sure.)

John J. Sullivan

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com>
On Behalf Of Dalynne Singleton
Sent: Friday, May 12, 2023 8:40 AM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] Life insurance default beneficiary

My client (partner of decedent) has received notice that her partner's life
insurance policy has no beneficiary.  The default from the life insurance
company is not to pay into the Estate but to pay in the following order -
there is no spouse or children.  The biological father has not been in the
decedent's life for 20 years AND an uncle was her legal guardian.  The
mother of the decedent predeceased her.  Is surviving "parent or parents"
the legal guardian and not the biological father?  I wanted to see if anyone
has any input on this issue.  Probate and family law issues seem to be
overlapping for me lately.

The above referenced policy includes a provision that if the Insured Person
did not name a Beneficiary, or if no named Beneficiary survives the Insured
Person; then payment will be made based upon the following vesting order:

1) to a surviving spouse; or if none

2) to the surviving child or children in equal shares; or, if none

3) to the surviving parent or parents in equal shares; or, if none

4) to the surviving brothers or sisters in equal shares: or, if none

5) to the estate, or in accord with the Facility of Payment section of this
Policy

RCW 11.02.005 (11) indicates the parent would be an "adoptive" parent but no
indication if "legal guardian" is also the parent for purposes of life
insurance:

(11) "Issue" means all the lineal descendants of an individual. An adopted
individual is a lineal descendant of each of his or her adoptive parents and
of all individuals with regard to which each adoptive parent is a lineal
descendant. A child conceived prior to the death of a parent but born after
the death of the deceased parent is considered to be the surviving issue of
the deceased parent for purposes of this title.

Dalynne Singleton

Gourley Law Group

Snohomish Escrow

The Exchange Connection

1002 10th Street / PO Box 1091

Snohomish, WA 98291

360.568.5065

360.568.8092  fax

 <mailto:dalynne at glgmail.com> dalynne at glgmail.com

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