John Bullis: Keep beneficiary information up to date
For the Nevada Appeal
Raymond Williams bought two life insurance policies in 1999. He originally named three persons as beneficiaries to both policies, but he noted in the policy that he was planning on changing the beneficiary of each policy to a trust and those three beneficiaries would be named as beneficiaries of the trust.
He did change the beneficiaries for each policy to his trust later in 1999. He explicitly revoked “any previous beneficiary designation,” but he failed to name a contingent beneficiary. In 2001 he got married and was married until his death in 2011.
But no one could locate the trust documents or anything indicating his intent on the language of the trust. It probably did not exist.
The life insurance company had a provision — “Where upon the death of the insured (Raymond), it appears that the certificate holder (Raymond) has failed to make any designation, or that all of the beneficiaries are dead, or if the designation shall fail for illegality or otherwise, then the death benefit shall be paid in the order of precedence as herein set forth: First: The insured’s spouse …”
The court had to decide who would receive the death benefits of the two policies. Should it revert back to the three beneficiaries, or is the beneficiary designation voided and his wife receive all of the death benefits?
The Nevada court said the wife would receive the death benefits. “If the insurance contract is unambiguous, it will be interpreted in its ordinary meaning. If the beneficiary designation fails for any reason, the death benefit will be paid to the insured’s wife.”
There was not enough proof to show Raymond’s intent to keep the original three beneficiaries and it was years after the note he did back in 1999. And he did get married and stayed married for about 10 years. He did not specify what percent each would have received or if there would be other beneficiaries.
Every important document, such as a will, trust, contract, and life insurance policy, should name at least two contingent beneficiaries in case someone dies, or like here, the primary beneficiary is effectively voided.
And we should always update and revisit important documents. If Raymond had looked at his insurance policies every few years, he would have noticed that he either forgot to draft the trust, or he would have remembered to change the beneficiary designations to reflect his intent and desires.
Did you hear? “The uncreative mind can spot wrong answers, but it takes a creative mind to spot wrong questions.” — Antony Jay.