Question about changing beneficiaries

[affirmwealth]

I'm an agent, but this question is more of a general beneficiary question that will be educational for me in case I come across this again in the future.

My cousin's father passed away last week, and he attended the funeral over the weekend. This morning, he tells me that the funeral was a big mess because his father's girlfriend and her daughter changed the life insurance policy beneficiaries to their names last January, removing him and his brother.

So he said the insurance company told him he had to file a document to contest it, because otherwise the insurance company was going to pay out to the girlfriend and her mother this morning.

I have several questions about this. My cousin says that last January, his father was very ill, and he was also illiterate. He said he thinks the girlfriend's daughter got all the information from her mother, and then took it upon herself to change the policy.

How can this happen? How can this be prevented?

 

[scagnt83]

File the document they told you about. Collect any type of medical records showing the Owner's impairment at the time the Bene was changed and submit that as well. Even get notarized statements from other family members or his friends who will confirm his impaired state at the time. Also collect the most recent signature of his you can find for them to compare to what was on the form.

The carrier can inspect signatures and look at medical records and anything else you submit to determine if the forms were submitted fraudulently.

You also could possibly contact the mother/daughter and tell them the family is contacting the authorities to start a fraud investigation. Ive heard stories where that happened and the offenders gave the money to the rightful Bene. And technically, you might be able to contact the authorities and open an investigation if they really were impaired. You could at least take them to civil court and try and have a judgement against them if you fail with the insurance carrier.

 

[scagnt83]

How can this happen?

Easy. Insurers usually do not compare signatures to the original on the app. If someone close has all relevant personal info, a half close forged signature will pass every time.

Even if insurers did compare signatures closely (on rare occasions they do), signatures often change tremendously over time, so if its an old policy, most signatures are going to look different.

And if they have access to the policy owners email/internet, they can do an e-signature with most carriers. Hopefully that did not happen in this case because it leaves less evidence.

 

[scagnt83]

How can this be prevented?

Being proactive about protecting a parents assets when they are mentally impaired. Lots of different options here... best being power of attorney.

There are other options though:

Co-Owner on policy. This would give a trusted relative (like the child/bene in this case) the same access and power on the policy as the impaired owner. Any changes would need both signatures with most carriers... and both people would be notified of changes. (this technically would need to happen before legal impairment... fine line I know... but any changes after legal impairment could be deemed invalid or illegal)

3rd party notification option. Many carriers offer an option to notify a trusted 3rd part of any issues or changes to the policy. This feature is specifically designed to help protect vulnerable individuals from unwanted changes or issues with their insurance. This option would be the thing to try if the Owner was already impaired.

Another more random form of protection, is you can put in your Will who your Beneficiaries are. It is not legally enforceable... but if the Will has been reviewed in the past few years... it would certainly make an insurance carrier start an investigation if the person was ill and then all of a sudden the Bene is changed to some random person. And Wills should always be reviewed every few years to ensure everything is up to date (not just for the Owners sake, but to prevent any discrepancies among beneficiaries). If someone is impaired, the Will should be reviewed when that happens and on a very regular basis afterwards. (reviewing means some type of exchange with the attorney who drafted it... or recording the date of review on the will and having it notarized if you dont use an attorney)


But if a relative is not in a position to handle their finances, Power of Attorney is always the best option. Some people think "dealing with money when someone is sick" is distasteful or wrong... but in reality it is keeping that persons dignity intact.

 

[Life Hawk]

Good advice form @scagnt83.

You need to follow-up as soon as possible. Begin a journal of calls people spoken to and answers given. These are items that can be provided to the department of insurance. A carrier doesn't want to be investigated or placed on any radar. By taking very logical steps and keeping a log along the way... it means you mean business.

It's a he said, she said until you being the steps that starts an investigation.

Start today!

 

[Allen Trent]

Being proactive about protecting a parents assets when they are mentally impaired. Lots of different options here... best being power of attorney.

There are other options though:

Co-Owner on policy. This would give a trusted relative (like the child/bene in this case) the same access and power on the policy as the impaired owner. Any changes would need both signatures with most carriers... and both people would be notified of changes. (this technically would need to happen before legal impairment... fine line I know... but any changes after legal impairment could be deemed invalid or illegal)

3rd party notification option. Many carriers offer an option to notify a trusted 3rd part of any issues or changes to the policy. This feature is specifically designed to help protect vulnerable individuals from unwanted changes or issues with their insurance. This option would be the thing to try if the Owner was already impaired.

Another more random form of protection, is you can put in your Will who your Beneficiaries are. It is not legally enforceable... but if the Will has been reviewed in the past few years... it would certainly make an insurance carrier start an investigation if the person was ill and then all of a sudden the Bene is changed to some random person. And Wills should always be reviewed every few years to ensure everything is up to date (not just for the Owners sake, but to prevent any discrepancies among beneficiaries). If someone is impaired, the Will should be reviewed when that happens and on a very regular basis afterwards. (reviewing means some type of exchange with the attorney who drafted it... or recording the date of review on the will and having it notarized if you dont use an attorney)


But if a relative is not in a position to handle their finances, Power of Attorney is always the best option. Some people think "dealing with money when someone is sick" is distasteful or wrong... but in reality it is keeping that persons dignity intact.

Great info. I would be hesitant to suggest changing ownership to add someone. It can cause some issues if the person you add gets divorced, sued or files bankruptcy. The money can be exposed in those situations just like adding someone as an owner of house or bank accounts. Also can cause Gift taxes to be owed by the giver.

Most states now have strict elder abuse laws & task forces, I would contact the elder abuse division of the attorney general of the state in this case if there are medical documents showing the father was incompetent.

As a side note, I am shocked at how many carriers & retirement account custodians no longer require a witness signature from a disinterested 3rd party. Should be required over age 70 or so IMO.

 

[scagnt83]

You need to follow-up as soon as possible. Begin a journal of calls people spoken to and answers given. These are items that can be provided to the department of insurance.

Great advice on the journal. Not just for this situation, but ANY insurance situation or discrepancy when you are dealing with carriers.

Log the person, date, time, subject, details, conclusion.

Saying "Susan H told me this on 4/4/20 around 3pm" is much more effective and traceable for a Carrier vs. saying "Someone told me this sometime in early April"

(a carrier isnt going to look for the recording in the second scenario unless legal action has been taken... but certainly would look for the first scenario)

 

[scagnt83]

It can cause some issues if the person you add gets divorced, sued or files bankruptcy. The money can be exposed in those situations just like adding someone as an owner of house or bank accounts. Also can cause Gift taxes to be owed by the giver.

Good point on gift taxes if there is a high CV. Ive never done this on an individual policy, but perhaps you could vest into the ownership on a % basis like Key Employees often do in a COLI situation.

Being exposed to judgments is more of a state by state issue imo. Most states have some type of threshold for protected assets inside a life policy.

Certainly more variables to ensure are covered in the Co-Owner scenario.

 

[affirmwealth]

Thanks everyone for the advice.