A recent decision by the United States Supreme Court should serve as a reminder to California families to pay close attention to the terms of a life insurance policy and who is named as the beneficiary.
Typically the person listed on a life insurance policy will receive the benefit even if the will specifically states that someone else should. This is because a life insurance policy is a contract between the person who takes the policy out and the company to pay a sum upon their death, as opposed to a will which is a bequest of assets already owned at the time of death.
In the recent Supreme Court case a man had a life insurance policy through the Federal Employee's Group Life Insurance plan to which he had named his wife at the time as the beneficiary. The couple later divorced and the man remarried but did not change the beneficiary to his second wife. And, although a state law instructed that current spouses replace former spouses in these situations, the court said that the designation of the first wife would remain.
What does this mean to California readers? Well, first and foremost it means that details and updates are crucial when it comes to an estate plan. When a new child is born, someone re-marries, or a loved one passes away, it is necessary to make updates to reflect the new make up of the family. This goes to the core of why we make estate plans - to make sure that our wishes are carried out properly after we pass away. Without an updated will and current, intentional beneficiaries on life insurance policies and trusts, it will be impossible for the court or our families to carry out our requests.
Source: Associated Press, "Supreme Court Life Insurance Decision: Virginia Man's First Wife, Not Second Wife, Gets The Money," June 3, 2013