[WSBAPT] Life insurance default beneficiary

Fri May 12 15:08:14 PDT 2023

While I agree some laws should be changed, we also have to keep in mind that many of these issues could be handled with simple participation by the resident.  In the case at issue, a beneficiary designation would have avoided this all.  The clients who unfortunately spend the most sometimes could have spent the least with even just basic preplanning.

Diane J. Kiepe

Diane J. Kiepe
Douglas Eden
717 W. Sprague Ave.
Suite 1500
Spokane, WA  99201
djkiepe at depdslaw.com<mailto:djkiepe at depdslaw.com>
509-455-5300

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Roger Hawkes
Sent: Friday, May 12, 2023 1:45 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Life insurance default beneficiary

Thanks, John.  Another good reason to revamp WA probate law.

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of John J. Sullivan, Esq.
Sent: Friday, May 12, 2023 9:16 AM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] Life insurance default beneficiary

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<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto: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<mailto: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
dalynne at glgmail.com<mailto:dalynne at glgmail.com>
Website:  www.glglawgroup.com<http://www.glglawgroup.com/>
Attorney/client meetings will be handled by teleconference or virtually whenever possible.  If you would like to set a telephone conference, zoom, Microsoft teams or in person meeting, please call or email my paralegal theresa at glgmail.com, angelina at glgmail.com<mailto:theresa at glgmail.com,%20angelina at glgmail.com> or selina at glgmail.com<mailto:selina at glgmail.com>.

LICENSED IN WASHINGTON
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