My Husband Never Listed Me on his Life Insurance Policy!

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Losing your spouse or significant other can become an even more painful life event if you discover that you are not named as the beneficiary on their life insurance policy.

Naturally, the passing of someone near and dear to your heart may not initially strike up thoughts of money. However, if you were dependent on the departed’s income in order to pay your bills and maintain your lifestyle, your attention will undoubtedly turn to the life insurance policy rather quickly.

Unfortunately, all too often, policy holders fail to update their beneficiary information after a significant change in life circumstances. This mistake can lead to great complications for those left behind, and is an error that can very easily be avoided.

A famous example of a life insurance mishap began almost a decade ago when Warren Hillman passed away unexpectedly. Although he had been married to his current wife for six years, his life insurance beneficiary information did not reflect that fact.

Having never updated his beneficiary form when he re-married, Hillman’s ex-wife was still listed as his beneficiary. Hillman hailed from Virginia, which, like New Jersey, is not a community property state. As such, his widow had little claim to the life insurance policy since she wasn’t named as beneficiary.

If you do live in a community property state, you and your spouse are considered to be equal owners of any and all income that both of you earn during the time of your marriage. Additionally, when your joint income is used to purchase something – you both automatically become joint owners of what was purchased – including life insurance policies. Even if your beneficiary forms aren’t up-to-date, your current spouse is entitled to receive life insurance benefits under community property law.

For spouses who live in non-community property states like New Jersey, life insurance beneficiary laws can be a little bit sticky, as Warren Hillman’s case exemplified. Even though his ex-wife remained listed on his life insurance policy, New Jersey law statute N.J.S.A. 3B-3:14 specifically states that a Final Judgement of Divorce between two parties shall automatically revoke either party’s right to receive the other’s life insurance benefits, even if they are named beneficiary when the other party dies.

This statute was put into place in NJ and other non-community property states precisely because of ex-spouses who forgot to update their paperwork after their divorce. Unless specifically stated in the couple’s Property Settlement Agreement, ex-spouses would no longer be entitled to each other’s life insurance benefits according to N.J.S.A. 3B-3:14.

However, in the case of Warren Hillman and many like him, his life insurance policy was initiated while he worked for the federal government. The Federal Employees’ Group Life Insurance Act goes against what is set out in any state laws like N.J.S.A. 3B-3:14 and states that the person listed as beneficiary at the time of death shall receive the life insurance benefits. Because of the ‘Supremacy Clause,’ federal laws always supersede state laws if there is a contradiction.

In the case of Warren Hillman’s widow, she did not receive any life insurance benefits. The Supreme Court ruled in favor of the ex-wife who was listed as the beneficiary.

Do you have up-to-date Estate Planning paperwork? Making the appropriate designations is crucial if you have had changes in your life that warrant doing so. If you need help making the necessary changes or if you want to prepare your first estate plan (will) – contact our New Jersey law office today. Consultations are free, and our results are priceless.

Image credit: Marleah Cole

Do You Have a Proper Estate Plan in Place?

last will and testamentMany people think, “I don’t need a will, I have nothing to leave to anyone!”

The truth is, everyone needs to have an estate plan in place so that surviving family members are clear about your intentions. There are multiple parts to an estate plan, and it’s not as complicated as it might sound.  First of all, the word ‘estate’ simply means ‘all of your assets’.

Now, in order to be fully prepared, you will want to address the following components of an estate plan: a will, the assignment of someone as your power of attorney, a living will (or a medical power of attorney.) Depending on your situation, you may want to consider a trust as well.

1. The will tells precisely how you want anything and everything you own to be distributed after your demise. If you pass away before you get a chance to make a will, your children and other family members will have no idea who gets what, which can spark long-lasting family arguments.

2. Power of Attorney means that you are choosing someone to handle your financial affairs if and when you become incapable of doing so yourself, while you are still living but have experienced a medical crisis that has left you unable to make wise decisions. This person will be able to sign your name on financial documents and is required to act only in your best interests at all times. If you pass away without having assigned a person as your Power of Attorney, the court system will have to assign you a guardian, which can cost your family members even more money.

  • Springing Power of Attorney only goes into effect under certain circumstances that you set out in your
    Estate Plan.
  • Durable Power of Attorney becomes effective as soon as you are deemed incapacitated by a medical professional.

3. A Living Will is also known as an Advance Medical Directive, and it is exactly what it sounds like. This is the document wherein you will make your wishes known regarding your medical care and living-saving interventions that you wish to have taken if you become incapacitated and unable to communicate these wishes yourself.

4. A trust can be beneficial for you and your family if you have a net worth of $100,000 or more, a large amount of assets in real estate, a business, or a pricey collection. You may also want to set up a trust if you want to make certain conditions for your heirs as to when they will receive their inheritance, usually in multiple parts or upon meeting certain conditions. If you have a spouse and other heirs that you need and want to support, like children from a first marriage, a trust will ensure that the remainder of your estate will go to those children after your spouse passes away. A trust can also be effective if you have a relative who is disabled. To leave all of your money to him may disqualify him for government assistance, but setting up a trust avoids that.

It is always recommended that you have a talk with your children or other heirs before you pass away so your intentions for your estate plan are very clear. Also, there are easy ways to give monetary gifts to your heirs tax-free. To learn more about all of the details involved in the estate planning process, find a qualified attorney and make an appointment today.  Having a plan in place will give you the peace of mind that you might not have even realized you were missing.

Image credit: Ken Mayer