Can life insurance be canceled due to divorce?

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PostPosted: Tue Jun 12, 2012 11:02 pm   Post subject: Can life insurance be canceled due to divorce?  

I live in MI. My ex husband and I purchased a life ins. policy some years ago. Since I was the younger of the us it was placed in my name as the owner with him as a rider alonger with the children. I kept the policy and cont to pay on it. He has now passed away. I have submitted the paperwork to the claim department. Now they are requesting the divorce papers along with the settlement. What does this mean. Because we've been divorced, but I own the policy can they refuse to pay

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PostPosted: Wed Jun 13, 2012 8:32 am   Post subject:   

No, they can't refuse to pay just because you two were divorced. Certain life insurance companies have different claim procedures, so I'm sure it's just part of their process. I wouldn't worry about it.

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PostPosted: Wed Jun 13, 2012 6:49 pm   Post subject:   

Quote:
No, they can't refuse to pay just because you two were divorced. Certain life insurance companies have different claim procedures, so I'm sure it's just part of their process. I wouldn't worry about it.




Actually, certain states DO have laws that state that once a divorce has been finalized, any personal/group life insurance beneficiary designations are null and void. California is one example of this.



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PostPosted: Wed Jun 13, 2012 7:01 pm   Post subject:   

Quote:
Actually, certain states DO have laws that state that once a divorce has been finalized, any personal/group life insurance beneficiary designations are null and void. California is one example of this.




I've never heard of that before, but I'll take your word for it. I guess I learn something new everyday. I tried to quickly Google MI law with divorce and life insurance, but nothing jumped out at me.


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PostPosted: Thu Jun 14, 2012 4:01 pm   Post subject:   

Quote:
Actually, certain states DO have laws that state that once a divorce has been finalized, any personal/group life insurance beneficiary designations are null and void. California is one example of this.


There are now about 20 or 22 states that have changed their PROBATE LAWS to revoke the beneficiary status of divorced persons in life insurance and retirement plans (those not covered by ERISA, which are preempted under federal law). California was somewhat late to the game, having enacted its changes in 2001 or 2002. Some states have had these laws on their books since the 1980s.



The laws do not prohibit the policyowner from renaming the now ex-spouse as the new beneficiary immediately following the divorce, nor do they apply when the divorce order specifically requires the former spouse to be maintained as the beneficiary.



The most adept divorce attorneys, however, will demand that ownership of the policy be transferred to the ex-spouse, which allows that person to name anyone or anything as the new beneficiary, as well as to ensure that the policy stays in force.



Quote:
I tried to quickly Google MI law with divorce and life insurance, but nothing jumped out at me.


Then you did not "google" correctly. MCL 700.2801 and MCL 700.2807 address the matter, and automatically revoke the beneficiary status of divorced persons, if not otherwise covered in the marriage dissolution order.


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PostPosted: Thu Jun 14, 2012 4:50 pm   Post subject:   

Max,



Probate laws have no impact on this. Probate laws only come into play when the owner dies.



In this case, the owner is still alive. The policy is not probatable and is not part of the insured's estate.


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PostPosted: Thu Jun 14, 2012 6:07 pm   Post subject:   

Max, don't try to be a know it all. You're not the insurance God of these forums, even though you might think you are.


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PostPosted: Fri Jun 15, 2012 2:49 am   Post subject:   

Quote:
Probate laws have no impact on this. Probate laws only come into play when the owner dies.


Now you're showing your lack of knowledge about probate laws. The Insurance Code is not the only place that deals with insurance issues, and the Probate Code is not only concerned with dead persons.



There is no way to say this more clearly: You are wrong. While life insurance proceeds are considered a "non-probate" asset -- specifically to allow those monies to bypass the property rights of married persons and their heirs -- in those states which have enacted legislation to revoke the beneficiary status of an ex-spouse, you'll usually find that legislation in the state's Probate Code (or in the section of their state laws dealing with probate or estates in general).



It has nothing to do with someone dying in this case, it's about revoking the property rights of married persons as established in probate law from those same persons following their divorce.



Do the research and find out for yourself. I've already posted the MI code sections, you can look at those for starters (the chapter of MI law is entitled: ESTATES AND PROTECTED INDIVIDUALS CODE -- that's close enough). But if you want to find the similar section of law in California, you'll have to look in the Probate Code. I'll give you a head start: http://www.leginfo.ca.gov/calaw.html


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PostPosted: Fri Jun 15, 2012 9:28 am   Post subject:   

Max,



Please stick with me as I fight to understand this issue more clearly.



Quote:
It has nothing to do with someone dying in this case, it's about revoking the property rights of married persons as established in probate law from those same persons following their divorce.




Jim and Gloria get divorced.



Ex. 1 Jim is the owner of a policy on his own life. Gloria is the beneficiary.



The policy belongs to Jim. Gloria gets stripped as beneficiary.



Ex. 2 Same as above, but Gloria is the owner of the policy.



The policy belongs to Gloria. How can a probate code strip her of her rights to an asset that she owns???



I'm willing to bet that you can't find a single court case in which the owner got stripped of their rights.



By the way, stripping the beneficiary of the policy would mean that there is no listed beneficiary. With most policies in most states, if there is no living named beneficiary at time of death, the default beneficiary is the policy owner if alive. Therefore, if Gloria did get removed as beneficiary in ex. 2, she would still be beneficiary because stripping the named beneficiary causes the owner, Gloria, to become beneficiary.

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PostPosted: Fri Jun 15, 2012 2:55 pm   Post subject:   

Quote:
Jim and Gloria get divorced.

Ex. 1 Jim is the owner of a policy on his own life. Gloria is the beneficiary.

The policy belongs to Jim. Gloria gets stripped as beneficiary.

Ex. 2 Same as above, but Gloria is the owner of the policy.

The policy belongs to Gloria. How can a probate code strip her of her rights to an asset that she owns???



Your examples are coherent, but isn't "Jim" having his right as owner stripped, too, if he and Gloria are parting as friends and had no intention of removing her as his beneficiary? He absolutely is.



The law makes a presumption in a different direction, and it affects both of your examples. But, in both cases, the owner has the ability to rename a new beneficiary, and it may be the same person. They just need to reaffirm their desire to prevent any disputes.



We're not on opposite sides concerning the outcome of this issue. That's not the disagreement here. In fact, the OP posted the same thread separately and in my response to her there, I said I believed that, although her situation was complicated, she was probably entitled to the proceeds for the very reason you point out -- she is the owner of the policy.



The whole disagreement was sparked by your errant comment that "probate laws have no impact", when that is entirely incorrect. To make matters worse, the law in Michigan is written with very vague (overly broad) language that only mentions "governing instrument" -- which could be a life insurance policy or title to an exclusive golf club membership. For that, you have to give credit to the idiots in the state legislature who create more problems than they solve when they write vague law.



I doubt you've had the inclination or taken the time to look at it, so here's the full text of MCL 700.2807:

Quote:


700.2807 Revocation upon divorce; revocation by other changes of circumstances.



Sec. 2807.



(1) Except as provided by the express terms of a governing instrument, court order, or contract relating to the division of the marital estate made between the divorced individuals before or after the marriage, divorce, or annulment, the divorce or annulment of a marriage does all of the following:



(a) Revokes all of the following that are revocable:



(i) A disposition or appointment of property made by a divorced individual to his or her former spouse in a governing instrument and a disposition or appointment created by law or in a governing instrument to a relative of the divorced individual's former spouse.



(ii) A provision in a governing instrument conferring a general or nongeneral power of appointment on the divorced individual's former spouse or on a relative of the divorced individual's former spouse.



(iii) A nomination in a governing instrument, nominating a divorced individual's former spouse or a relative of the divorced individual's former spouse to serve in a fiduciary or representative capacity, including, but not limited to, a personal representative, executor, trustee, conservator, agent, or guardian.



(b) Severs the interests of the former spouses in property held by them at the time of the divorce or annulment as joint tenants with the right of survivorship, transforming the interests of the former spouses into tenancies in common.



(2) A severance under subsection (1)(b) does not affect a third-party interest in property acquired for value and in good faith reliance on an apparent title by survivorship in the survivor of the former spouses unless a writing declaring the severance has been noted, registered, filed, or recorded in records appropriate to the kind and location of the property that are relied upon, in the ordinary course of transactions involving that type of property, as evidence of ownership.



(3) Each provision of a governing instrument is given effect as if the former spouse and relatives of the former spouse disclaimed all provisions revoked by this section or, in the case of a revoked nomination in a fiduciary or representative capacity, as if the former spouse and relatives of the former spouse died immediately before the divorce or annulment.



(4) Each provision revoked solely by this section is revived by the divorced individual's remarriage to the former spouse or by a nullification of the divorce or annulment.



(5) No change of circumstances other than as described in this section and in sections 2803 to 2805, 2808, and 2809 causes a revocation.


It doesn't mention life insurance, it doesn't mention beneficiary. It says "governing instrument" and "to serve in a fiduciary or representative capacity, including, but not limited to . . . ." Like most other similar probate laws, it is misogynistic at its core -- it is intended to revoke the woman's share in most cases. But we have a twist in this instance.



As I see it, the whole mess confronting the OP is the result of the divorce attorneys' failure to understand the importance of dealing with or resolving the life insurance issue within the divorce.



And the real complicating piece of this law is the language of this one subsection:



(b) Severs the interests of the former spouses in property held by them at the time of the divorce or annulment as joint tenants with the right of survivorship, transforming the interests of the former spouses into tenancies in common.



And here's why. Let's alter the situation slightly and see if it doesn't make more sense. The OP's husband owns the policy and the OP is the additional insured. After the divorce, because the attorneys leave the matter unresolved, the husband calls the insurance company and says, "Cancel the coverage on my wife." The insurance company has no idea a divorce has occurred. As the owner, he's entitled to do that. He doesn't have to worry about the ex-wife as beneficiary of his death benefit, the law has taken care of that, so he doesn't do anything to change that.



I have never seen an insurance company that would not allow the already-approved-for-life-insurance wife to retain her coverage in an individual policy. All she has to do is contact the insurance company, make an application perhaps, and pay the premiums (and, yes, we're probably talking about the difference between a term rider and a more costly cash value alternative -- but that's beside the point).



Effectively, this sets up a de facto form of joint tenancy in the original policy even though only the husband is the owner of the policy. That's essentially the situation the OP now finds herself in (she just never terminated the husband's coverage).



The MI law changes that position to "tenants in common" which preserves each tenant's portion of assets for their own heirs, segregating it from the other tenant's asset column. It also prevents the asset from being "hypothecated" -- the legal term (hidden by artificial means) -- so that the joint owner loses the asset unwillingly.



With divorce order in hand, the now ex-husband probably could have gone to the same insurance company and obtained a new policy on himself for the same coverage amount and issue age without having to go through underwriting. Once-approved, always-approved, right? (As long as coverage does not have to be reinstated.)



That could be the theory behind a challenge to the OP's entitlement to the proceeds. I don't believe it would hold water, but when the law is vague, some judge has to step in and do the legislature's job for them, and then come the appeals.



The OP continued the husband's coverage, paid the premiums, but failed to simply rename herself as beneficiary following the divorce to maintain compliance with MI law, which would have eliminated all possibility of a challenge to her entitlement. If the court were to find that the heirs are entitled to the death benefit, the OP would, at least, be entitled to recovery of the premiums she paid, since she had no duty to pay them if she were not going to benefit from them.



But, like you, I don't believe her entitlement should -- or will -- be disrupted, but there's no telling what could happen in a courtroom. Vague law leads to bad judgments, and sometimes to worse appellate decisions.



As fate would have it, and although the circumstances are not quite the same, in my email this morning came a link to a new appellate decision involving a New Hampshire Supreme Court case and a life insurance policy in a divorce case in which the wife was removed as beneficiary by the husband in favor of his children -- in the face of an "anti-hypothecation" order during the litigation. If you're interested in reading it, here's the link: http://statecasefiles.justia.com/documents/new-hampshire/supreme-court  /2011-454.pdf?ts=1339589369


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PostPosted: Fri Jun 15, 2012 3:13 pm   Post subject:   

Quote:
the default beneficiary is the policy owner if alive.
and
Quote:


If Gloria did get removed as beneficiary in ex. 2, she would still be beneficiary because stripping the named beneficiary causes the owner, Gloria, to become beneficiary


Or it could be her estate if she were not alive.



But we've been over this issue, too. Ownership of a life insurance policy is a matter of contract law. If the owner dies prior to the death of the insured, the contract will discuss who the new owner will be, and that could be the insured, as it is in some policies. Otherwise, it is a matter of probate law in terms of property ownership. And if the insured was once married but is now divorced, probate law could remove his/her ex-spouse as a successor beneficiary. Owner-beneficiary is the complication here. MI law is not very specific about it as it relates to this "governing instrument".



And the only thing the "what ifs" do is confuse the issue.


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PostPosted: Fri Jun 15, 2012 5:27 pm   Post subject:   

Thanks for the continued discussion.



As I read MCL 700.2807, in terms of life insurance beneficiaries seems to be (1)(a)(i). This would certainly be applicable if the insured and the owner are the same person. It isn't applicable if the owner is not the insured. That is because the disposition isn't going to the ex-spouse. It is going to the individual.



As for the rest of your post, I'm having a little trouble following simply because I almost never deal with policies with one owner and two insureds with one of the owners being one of the insureds. I'll assume that you are correct.



As best as I can tell, at least in the case of Michigan, I am still missing how probate laws have anything do with this when the owner doesn't die.


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PostPosted: Fri Jun 15, 2012 5:35 pm   Post subject:   

I'll try to simplify my point.



Let's name our spouses, Sam Jones and Mary Jones.



Probate law can remove Mary Jones as beneficiary of something owned by Sam Jones.



Probate law can't remove Mary Jones as beneficiary of something owned by Mary Jones.


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PostPosted: Sat Jun 16, 2012 4:00 pm   Post subject:   

Quote:
I am still missing how probate laws have anything do with this when the owner doesn't die.


This is because you are only thinking of probate as a "human death" issue. Using the word "person" would be a better choice. A website "StateLawyers.com" defines probate law as:



Quote:
The legal process of transferring of property upon a person's death is covered under "Probate Law." Although probate customs and laws have changed over time, the purpose has remained much the same: people formalize their intentions as to the transfer of their property at the time of their death (typically in a will), their property is collected, certain debts are paid from the estate, and the property is distributed.




Now, I know that still doesn't answer your question, but it's a start (in fact, it sort of supports your point). So before I get to your question, let me ask a couple of my own. The specific, and different, pictures they paint may help.



1) Who can be a "person"?

2) Who can have an estate?

3) Who can "attack" an estate?

4) What happens to a person's property following their death?



Answers:



1) "Person" includes natural persons (living, breathing human beings) and non-natural persons (partnerships, LLCs, corporations, trusts, etc.) [I'm deliberately leaving out two other "things" here for now.] One of the attributes of a "person" is that it may sue or be sued.



2) Every "person" has an estate. Dollar-wise, it is the sum total of the value of their assets minus liabilities. Insurance companies that become insolvent have an "estate". State Insurance Guaranty Associations limit the claims payable to certain insureds when an insurance company's estate does not have enough remaining assets to pay all claims.



(We've argued that topic until I've turned blue, seemingly with no resolve. It does not prevent a person from filing a separate claim against the estate of the insurance company, and possibly having that claim paid. But since insurance company insolvency is a state matter, most of that subject is covered in the state's insurance code, and not entirely in the realm of probate law, but probate law does eventually come into play because a dead "person" is involved.)



3) A "person" who has money or owns property can have their money or property "attacked" during their lifetime by anyone with a legally enforceable claim (a mortgage, loan contract, legal judgment, etc.). A money or property claim against a dead "person" is enforceable against their estate through the Probate Court (theoretically, for a limited time -- but in 2001 [October issue, if I'm not mistaken] Forbes magazine reported on an estate in Texas that was still tied up in probate after more than 60 years -- I used to use that in my classes to show why wills alone are often insufficient estate planning tools).



4) Non-probate assets pass to the persons entitled to them without interference (supposedly). Probatable assets must be disposed of through the probate process, and is left to the discretion of the Probate Court, subject to state or federal probate law as applicable.



Discussion



Oh! Estates are "persons", too (one of the "persons" I conveniently omitted from my answer to Q1). If you read the court's decision in the case I left the link to above, you will see the words "personalty of the estate" used a couple of times in reference to who's responsible for paying the "just debts" of the decedent.



Well, marriages are also a sort of "person". We grant special privileges to married persons that non-married persons cannot get (one of the motivating forces behind the same-sex marriage issue is the fact that federal law ignores this kind of union even if state law allows such marriages.) And one of those in particular is the transfer of marital property to the surviving spouse without taxation (and a step-up in basis) at the death of the other.



So here come my word pictures to try to help clear your confusion.



A) Sam and Mary are married. Sam dies, having named Mary as his life insurance beneficiary. Mary gets the money. No one can attack the money before it gets to Mary (not while the insurance company has it, not while it's on its way to Mary). Various state and federal laws govern, as does contract language.



Once in Mary's hands, personal claims against Mary and her money are fair game. But claims against Sam and his money can only be enforced in Probate Court. Mary's money cannot be used to satisfy the claims of Sam's creditors. (Mary might have to use her own money to settle the estate if there are joint-debt matters to be resolved. This commonly occurs when a sole proprietorship operated by the decedent is involved.)



B) Sam and Mary were married, but divorced two months before Sam died. Sam named Mary as his life insurance beneficiary, but did not change that after the divorce. Sam also had a will naming Mary as the person to receive his property following his death. Sam got remarried two days after the divorce was final, and changed his will the same day giving the new wife Mary's old position, believing it also covered his life insurance.



Mary gets the life insurance money, but does not have any rights to other property not given to her in the divorce, unless she has some other enforceable claim . . . IF she doesn't live in a state that automatically revokes her as the beneficiary of the ex-spouse.



C) But Mary lives in Michigan, which, we agree, revokes a person as the life insurance beneficiary of an ex-spouse. Mary gets nothing following Sam's death other than what her divorce order entitles her to receive. If the insurance company inadvertently pays the policy proceeds to Mary (believing she was the rightful beneficiary on paper), the ESTATE of Sam can sue Mary for an amount equivalent to the policy proceeds. It had the right to legally prevent that transfer, but probably not the opportunity.



Here, you have to let go of the issue of policy ownership for a moment. The law in MI does not use the term "owner" or "ownership". It simply says, "to his or her former spouse in a governing instrument." [I(a)(i)] Mary is automatically revoked as beneficiary.



In reality, when a policy allows an additional insured (spouse or child), the contract states who that person's beneficiary will be (absent a special declaration by the owner) -- and it will be either the primary insured or the policyowner. The insurance contract language governs, not state or federal law.



State law completely preempts the policyowner's choice in the matter. Sam has not died -- he is still the policyowner. But the "person" of the marriage has, and that "person's" interests in money or property, normally vested in the spouse, die with it. If Sam wants Mary to have the life insurance money, she can't have it unless he renames her as beneficiary.



D) Sam doesn't do that. But he doesn't name a new beneficiary either. Now what?



Probate law settles the matter. The otherwise non-probatable assets become part of the probatable estate, and may be used to satisfy any and all legitimate claims against the estate. Which is why I never want a life insurance policy to name "My Estate" as beneficiary (or to not have a named beneficiary). Creditors, including the governments, have top level claims. Spouses and heirs are at or near the bottom of the totem pole.



So here's the issue in the OP's matter. She's the policyowner. Let's assume the contract says the policyowner is the de facto beneficiary of the added-on spouse. Because the OP and her husband are married, state law preempts the contract language -- remember, it completely ignores "ownership" (which IS the problem, because it does not anticipate this particular situation) -- and the right of a spouse to the benefit of the governing instrument is "severed" [1(b)].

Quote:


(b) Severs the interests of the former spouses in property held by them at the time of the divorce or annulment as joint tenants with the right of survivorship, transforming the interests of the former spouses into tenancies in common.


It could fairly be argued that the life insurance on the OP and owned by the OP, but also covering the husband and children, is a "joint asset" -- hubby had to cooperate in the application for insurance, OP freely included him in that application. It was a mutually agreed "joint venture".



Because MI state law is silent as to matters of life insurance ownership and the rights of the owner, this particular matter is unresolved. Let's assume the Probate Court honors probate law and severs the OP from the death benefit. It could make for interesting precedential case law, because the appellate court would have to determine what the legislative intent really was (that's not normally the job of the Probate Court).



Until then, to be 100% certain that the OP's right to receive the policy proceeds resulting from her ex-husband's death, the OP only needed to write to the insurance company and state, "The beneficiary of the policy proceeds resulting from [Sam's] death will be [me]." Her divorce attorney should have known and communicated this to her.



Now, if it were to go to appellate court, I believe the court would not find itself bound by the vague language of state probate law and would look to the policy ownership and contract law instead. And if it did, the OP's entitlement to ex-husband's death benefit would be honored. Not as ex-spouse, but as policyowner. Your point (and I agree with it).



How would the court do this? By looking, as it must, to legislative intent.



It was probably NOT the legislature's intent to revoke an owner's right. It was [probably] the legislature's intent to revoke a former spouse's right (and, logically, the heirs of that former spouse) -- so that the probate process would not get bogged down by claims of [mostly] jealous ex-wives (but there may be just as many jealous ex-husbands). But it inadvertently did so in this situation.



There is no other place to deal with this concept than in probate law. That's the part you are having difficulty seeing. It has nothing to do immediately with the death of anyone human, but it has everything to do with the immediate death of the "person" of the marriage. It foresees the potential for future problems after an ex-spouse dies and tries to eliminate the problem to begin with.



Unfortunately, without direct experience in insurance or estate matters, I think no one in the legislature considered the situation in which the OP now finds herself. Husbands own insurance on themselves and name wives as beneficiaries. Wives own insurance on themselves and name husbands as beneficiaries.



Oops! What about a husband's/wife's single policy that also covers the other spouse? Loophole.



Legislation frequently overlooks these kinds of little "technicalities" until after it becomes a big problem. We used to let people DEDUCT life insurance loan interest they didn't even pay back. Until the industry began abusing that privilege with UL policies in the late 1970s and early 1980s. That's how we ended up with "Modified Endowment Contracts". Congress created a whole new "thing" on its own, in part to close what was an otherwise legal loophole in the Internal Revenue Code they failed to close with the Tax Reform Act of 1986.



The changes to the IRC in 1988, designed in part to eliminate life insurance phantom interest deductions went much further and eliminated the deductibility of ALL personal loan interest (credit cards, autos, student loans, furniture) in individual tax returns except home mortgages (a "joint" income tax return is still an "individual" return). Student loan interest was only recently restored as deductible. And mortgage loan interest is still on the Congressional chopping block as the last major take-away from taxpayers (it has come up in proposed legislation in almost every session of Congress since 1989).



Once you step aside from the issue of ownership, and just look at this as a matter between ex-spouses (which has now extended to the heirs of the deceased ex-husband), you can see how an insurance company does not want to arbitrarily give the proceeds to what may be the wrong person. Not that they would have any liability, but if it can be proved that they knowingly paid the money to a person not entitled, then there could be a cause of action against the insurance company -- because the law only protects an insurance company that "innocently" pays the money to a person it believes is the correct beneficiary.



A likely outcome here is that the insurance company will send the money and an "interpleader" to the ex-husband's estate for a determination by the Probate Court as to whom it may be disbursed -- to the OP as a non-probatable asset, or to the heirs as a probatable asset.



Personally, I don't believe it should become part of the probatable estate of the ex-husband, and it really should go to whomever the contract states (either primary insured or policyowner -- regardless of the former relationship between the decedent and that person).



We'll just have to wait and see. Hope this helps.


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PostPosted: Sun Jun 17, 2012 2:12 pm   Post subject:   

A little addendum to the discussion above.



Notice that the MI estate revocation law defers to -- does not preempt -- any prior orders of a court in a divorce action. There's good reason for that. The final divorce order expresses the desires of the parties, or the action of the court when there is no general agreement between the parties. The matter is, one way or the other, settled.



Divorces can only happen while the parties are living. If a person dies DURING a divorce proceeding, all bets are off and probate law governs -- even if it appeared that the parties were well on their way to a resolution of property division -- unless there were already some matters that had been officially ordered by the court (sometimes happens in an initial separation agreement or divorce filing).



Divorce deals with living persons, probate deals with matters after a death occurs. The final divorce decree is similar to a will in that sense. It characterizes the intents of the "person" with regard to the residue of the estate. Once the divorce is final, that "person" (the joint entity of the marrige) no longer exists. The divorce decree may forget to address certain issues, and although not legitimate, is surely going to cause problems later.



The exact same thing happens with a business partnership. If one of the partners leaves (vertically or horizontally), the partnership is dead, and certain issues may need to be resolved. Probate law deals with that death, too. Formal written partnership agreements will supercede probate law. But not all partnerships are neatly created on paper -- some exist only by handshake, even today in the 21st century. The partnership agreement is just like a will. Without one, the death is "intestate" and the Probate Code takes over.



We have ample examples of defective wills. People try to do-it-yourself and leave things out, attorneys fail to make proper inquiry and leave things out, something new comes along after a will is written and the will is not updated accordingly, and something is inadvertently left out. To a limited extent, probate law deals with that by making certain presumptions and the court follows the law in making its dispositions.



The subject of beneficiaries is one of the most frequently discussed topics in this forum. Who has the right to the proceeds, etc.? In those states which have gone the extra mile and enacted the legislation, the state presumes that following a divorce, the parties go separate ways in disgust and neither wants anything to do with the other.



That's probably true in the majority of cases, but not always. And when, in those states, the parties split with the intent to remain friends, the attorneys involved have a higher responsibility to make sure that those persons do not run afoul of the probate code unintentionally. But we all know that some attorneys are not that dilligent.



And that's why insurance agents do their clients a big favor by understanding their state's laws and revisiting clients on a regular basis to make sure that everything with a person's life insurance is up to date -- coverage amounts, addresses, any new kids added to a child rider officially, and . . . beneficiaries. How often should this be done? Annually would be ideal, but from a practical standpoint, is probably unrealistic. At least once every two years would be a good thing.



Unfortunately, many agents are just as lax as the attorneys. Collect the initial commission and go on the next sale. If the client needs something, they'll call me. Agents lose both income and clients with such an attitude.



We have the opportunity to help the living. We do the best job for them by making sure nothing goes wrong once they die. Agents who fail to understand how various laws work can result in dreadful things happening later. We don't give legal advice, but that does not absolve us of the responsibility to know the law (in general).



I have testified against agents who tried to hide behind, "I don't give legal advice" by saying, "I don't know what the law requires." Our licensing demands more effort than that.



_________________

CA-licensed Life & Disability Analyst. CA Insurance Lic #0596197. Also investigating insurance company abuses, and providing litigation support/expert witness services. Send me your questions, and I'll send you my answers.
MaxHerr
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MaxHerr
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