Dear Quentin,
A friend suddenly passed away from a heart attack, but had his $ 500,000 life insurance way before he got married and left his sister as his beneficiary. His wife knew about his unhealthy lifestyle and wanted him to change the policy to make their 3-year-old son his beneficiary.
Long story short: He died without updating the policy. Can anything be done about it so the son can actually get some of the money — or is it maybe up to the sister to do the right thing for her nephew? By the way, their relationship was solid without any drama or suspicion.
A Friend In Need
Related: ‘I was devastated by her infidelity’: I’m still on the deed of my ex-wife’s house, but our divorce decree says she gets the property. Am I sitting on a golden goose?
His sister may feel that in order to “do the right thing” she should follow her brother’s instructions by accepting the money, whether it’s $ 50,000 or $ 500,000.
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Dear Friend,
Shoulda, woulda, didn’t.
That’s the hard truth about people who delay, equivocate, or simply choose to forget to change their beneficiaries even by request. The presumption is that to “do the right thing” involves acquiescing to his wife’s request during your friend’s lifetime that he change the beneficiary to his son. I understand your friend’s feelings: Who wouldn’t want to leave their money to their child, right? Especially if that beneficiary designation was made before they had their child.
However, his sister may even feel that in order to “do the right thing” she should follow her brother’s instructions by accepting the money, whether it’s $ 50,000 or $ 500,000. Morally, she could argue that she is entitled to keep the payout, whether you or I, or the readers of this column disagree. Legally, there is no debate. The moral or ethical decision in this case is her own. The larger the sum, the more there will be to split, sure, but the harder it might be for her to give it up.
I could tell you that his sister should “do the right thing” by giving this money to her brother’s 3-year-old son. But that’s a decision that she should make for herself. If we carried out a poll to ask, “What should she do with the money?” A vast majority of people might say they believe she should give it to her brother’s family. But if the shoe were on the other foot, what would they do? I would bet that many more people belonging to that same cohort would keep all or some of it.
Also see: My late brother’s three children say they should receive the same annual monetary gifts their grandmother gives to her other children. Are they entitled?
That’s why lawyers tell people to regularly update their beneficiaries and make a will. There may be one very good reason to “do the right thing” for a person’s family and 1,000 reasons to “do the right thing” for yourself. And if she decides to give all or some of it to her nephew? She could “disclaim” the inheritance (the money would then be distributed in accordance with intestate laws in their state) or even create a 529 savings plan for her nephew’s college education.
Do I think he would have changed the beneficiary designation if he had not died so suddenly and tragically? Probably. But we’ll never know. Does the wife who keeps her first husband as a beneficiary on their life insurance do so because she “forgot” or never got around to it or because there were problems in their second marriage or she didn’t mind leaving her ex a little surprise gift? Answering that requires more Monday-morning quarterbacking.
This is a tale as old as time (or life insurance policies). A parent or spouse either forgets to change their beneficiary or decides to forget to change their beneficiary. His sister’s decision may also be influenced by her relationship with her sister-in-law. She could argue that his wife reminded him several times and gave him ample opportunity to change the beneficiary on his life-insurance policy. If he didn’t, why didn’t he? That’s the $ 500,000 question.
Such decisions are simpler when they are not our own.
More columns from Quentin Fottrell:
‘Once a cheater, always a cheater’: I’m the beneficiary on my ex-husband’s $ 250,000 life insurance. He’s now threatening to change it. Is he in breach of our divorce decree?
‘He’s planning to bleed me dry’: My husband turned into a monster after we married. I own a $ 1.3 million home. How do I save myself and my finances?
‘He’s an egomaniac’: My husband said he’ll flush his $ 1.5 million IRA ‘down the toilet’ rather than split it with me in our divorce. What can I do?
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