Most of us have been advised to have life insurance to provide for our families in the event of tragedy, and thankfully, many people have heeded this admonition. Unfortunately, situations arise in which an insured person forgets to update beneficiaries, or in which an insured is coerced or tricked into changing beneficiaries. In such cases, the people who believe they are entitled to the proceeds of the insurance policy must contest the named beneficiary on the policy.

Unfortunately for the parties contesting the named beneficiary or beneficiaries, this is a legal process which must be addressed in a court, not simply in communication with the insurance company. As a result, the process can be a drawn-out and costly probate battle. Retaining experienced legal counsel early in the process is the best hope for a quick resolution.

Grounds for Contesting a Life Insurance Beneficiary

A life insurance policy is a contract in which an insurance company agrees to pay the proceeds of a policy to a named beneficiary upon the insured’s death. It can be extremely difficult to challenge the validity of this contract. One common scenario in which people want to contest a life insurance beneficiary involves divorce.

Let’s say that John marries Amy, takes out a life insurance policy for himself, and names Amy as beneficiary. Then John and Amy divorce and John remarries. He and his second wife, Betty, have a child. Fifteen years later, John dies, having never updated his life insurance beneficiary. Betty, understandably, may want to contest this beneficiary designation. She claims that it was no longer John’s intention to have Amy benefit from the policy.

In another possible scenario, Ethel, now elderly, many years ago took out a life insurance policy naming her daughter Frieda as beneficiary. Frieda lives across the country, and Ethel’s neighbor, Lucy, provides much of her care. After Ethel’s death, Frieda is shocked to discover that Ethel changed the beneficiary on the policy to Lucy a few months before. Lucy claims Ethel did it out of gratitude for her devotion, but Frieda suspects that Lucy tricked or pressured Ethel into changing the beneficiary. She wants to contest Lucy’s status as beneficiary on the grounds of fraud or duress.

In either case, the parties contesting benefits being paid to the named beneficiaries would have an uphill legal battle, as well as the burden of proving their positions. The likely outcome would be an expensive, protracted court battle, with no guarantee of success.

Avoiding Life Insurance Beneficiary Contests

There are some important lessons to glean from all of this. First and foremost, if you have a life insurance policy, review it regularly and update your beneficiary designations, particularly after major life events such as divorce or the birth of a child. Don’t forget to do this with all policies, including those offered as a benefit of your employment.

if you have a policy and decide to change the beneficiary, let them know, explain why, and document the discussion. This is especially true if you are changing your beneficiary from a family member to a partner, caregiver or friend; in this way, you avoid surprising the former beneficiary and can answer his or her questions about the change, minimizing hurt feelings and hopefully avoiding a beneficiary contest after your death.

What if you are in the position of needing to contest a life insurance beneficiary? First, contact an experienced estate administration lawyer without delay; as difficult as it is to challenge a beneficiary, it is virtually impossible to recoup the proceeds of a life insurance policy that have been paid out to another party. Also, ask your lawyer about the possibility of alternative dispute resolution, such as mediation or arbitration. Such options may lead to a quicker, more amicable and less expensive resolution to a life insurance dispute than litigation would offer.

If you need to contest a life insurance beneficiary, contact the experienced estate planning and probate attorneys at Davis Schilken at 303-670-9855 to arrange a consultation at one of our two locations in The Denver Tech Center and Golden, Colorado. We look forward to working with you.