by Guest » Sat Dec 06, 2008 03:25 pm
My boyfriend's father died in August. His divorce was finalized from his ex-wife in April. Apparently, he never changed her as the beneficiary on his life insurance policy. My boyfriend and the siblings really didn't care, because they didn't have the money to begin with-so what would it matter if they didn't have it now.....however the ex-wife agreed to split the insurance money 5 ways--believing it was only fair and she had a decent relationship with all the kids/grandkids. My boyfriend and his siblings had a letter drafted by their lawyer stating that the ex-wife agrees to split the life insurance money and she signed it. It was sort of her suggestion. After all, their dad divorced her (and on a side note, his reasons for divorcing her had something to do with him pulling his retirement out early upon her suggestion so that she could place some money in an acct that would draw interest and some in the bank acct to pay bills with, only to find out that the money disappeared and she began using his credit card to pay for bills, subsequently causing my boyfriends dad to file for bankruptcy). My boyfriend got a letter in the mail yesterday from his step-mom stating she's going to be keeping all the insurance money basically because she feels entitled to it. She rattled off a list of things she has done that are only simply things a nice person would do without payment. (claims she paid his cell phone bill for a year, a gas bill in 2/08, their joint tax return in 2007, and has been feeding the cats since his death and mailing his mail to my boyfriend's sister. It's so ridiculous....however, my question is this.
Can she get away with this if she signed a notarized document stating she agreed to split the insurance money? After all, they were divorced and it was more than likely an oversight on his part. Also, would something like this be suitable for civil court and how long should it take???
Thanks all.
Can she get away with this if she signed a notarized document stating she agreed to split the insurance money? After all, they were divorced and it was more than likely an oversight on his part. Also, would something like this be suitable for civil court and how long should it take???
Thanks all.
Posted: Fri Dec 04, 2009 11:57 am Post Subject: life insurance
I guess I'm putting in my '2 cents' in here: why would you WANT to pay on an Life Insurance policy on your ex? I'm not saying it's a 'wrong' thing to do, but,..I guess I never understood why people do this. Can you give me some more 'insight' please? I'm very curious.
Posted: Fri Dec 04, 2009 03:39 pm Post Subject:
sdchargersfan . . .
The concept is not that difficult or unreasonable. Let's say you and your spouse each own $500,000 of life insurance on your own lives, and have named each other as primary beneficiaries. You're living happily ever after, but something happens along the route and you decide to go your merry ways, and for sake of discussion, amicably.
But, in doing so, you have some major outstanding joint debts and agree to split them and each be responsible to pay them off (or have other obligations, like children who are still several years away from adult status and/or graduation from college) -- understanding that the joint obligation cannot be severed. Neither of you is interested in taking the bankruptcy route to debt elimination, but it will take a number of years to pay these debts off. At least there's enough money in the death benefit of either policy to provide the necessary funds.
How do you prevent your ex-spouse from cancelling the insurance and sticking you with the entire debt you thought they were going to pay, and which would be paid by the proceeds of their life insurance?
Three main ways: First, be named as the irrevocable beneficiary (usually reserved for naming a trust or charity as beneficiary), in which case you could legally force your ex- to maintain the policy. Second, agree to pay each others' premiums to ensure that the policies remain in force until the remaining obligations are no longer a concern (but you're powerless to prevent them from taking you off as beneficiary, which makes you NUTS for choosing to pay their premiums).
The third way is perhaps the best, just assign ownership of your own policy to them, and they assign theirs to you. As owner, you are unlikely to name someone else to receive the proceeds before your obligations have diminished (other than as a collateral assignment of policy proceeds to a third-party you owe money to, which does not make them a beneficiary).
[Note: If a large amount of alimony is involved, a good lawyer might recommend that you agree to pay the cost of your ex's life insurance within the total alimony payment, so at least you get a tax deduction for the amount of premium you're paying, which is not otherwise deductible (your ex will pay the tax). May not make you happy, but it's a valid reason, even if you are no longer the beneficiary.]
So how do either of you know you're going to receive the proceeds when the other dies. Simple, you're paying the premium to keep the policy in force. If you choose to stop paying, you understand that there may be no money to collect following the insured's death.
As the owner, if it's a cash value policy, you could also borrow the cash value along the way and use it to pay off some of all of your obligations, or throw a party, or whatever you choose to do with the money, understanding, however, that by doing so you diminish the death benefit by the same amount plus interest on the life insurance loan.
Once the debts or obligations are no longer a concern, you both reassign the policies back to each other, and you choose whether you want to keep your own insurance in force or not. If you do, you pay the premiums, if you don't, you surrender the policy.
The only way to be certain that the life insurance proceeds will be there if needed is to continue paying the premiums. Makes no difference who the owner is. Life insurance is simply, "I pay, I die, You pay," (or "You pay, you die, they pay," same thing).
It's not any different from the party who holds title to your automobile (let's say its a $300,000 Lamborghini that you still owe $250,000 on -- nice ride!), and who buys a $300,000 decreasing term policy for the 5 years you're financing the vehicle -- guaranteeing that they'll collect the balance on the loan if you are killed cranking that 'ghini at 180mph on some stretch of road somewhere. They could choose to include the cost of insurance in your financing (usual method) or they could pay it on their own (this is the NUTS part that is throwing you off).
Why would they want to pay the premium instead of making you pay it? To be sure it gets paid, so they'll be able to collect the benefit.
That's the reason why credit life insurance policies (on cars, motorcycles, boats, airplanes) are normally purchased with a single premium. No one has to remember to pay future premiums, and no one can skip out on the premium payments. If the debt is repaid early, there will usually be a refund of some or all of the "unearned" premium. Either way, the debt gets paid.
Hope this helps to clear the confusion.
Posted: Sat Dec 05, 2009 02:32 pm Post Subject: insurance
OK.....alot of your explaination DOES make sense. I guess that's looking toward your future...taking care of it, I mean. With all of that money, your debts WOULD be paid!!LOL
Posted: Sat Dec 05, 2009 11:14 pm Post Subject:
Actually, $500,000 is about triple the average amount of lindividual ife insurance in force in America. It's a bit higher for term policies at about $240,000.
Here in California, $500,000 is not going to pay off most mortgages + consumer debt + fund children's education + leave anything for the surviving spouse.
And after 2010, when the old estate tax rules reappear, many middle income households are going to be exposed to estate taxes simply due to the value of their home, cars, retirement plan assets, business assets, and life insurance benefits.
The Democrats plan for Obamacare (if it passes) will be financed in part by the reaping of the 55% estate tax on the largest estates that are not properly protected. When they talk about the "wealthy paying their fair share" most people think they're only talking about income tax. The estate tax is the Democrats' secret weapon.
If it drops back to just $1,000,000, a $500,000 home and a $500,000 life insurance policy is all it will take to expose every additional penny of estate value to taxation following death (yes, I know, it all passes to the spouse at "step up value" first, but not everyone is married, and there are plenty of widows and widowers waiting at death's doorstep -- with plenty more on the way as we Baby Boomers are now hitting our 60s).
Posted: Sun Dec 06, 2009 12:01 am Post Subject:
Max, there is a 0% chance of it going back to $1,000,000.
Posted: Sun Dec 06, 2009 12:04 am Post Subject:
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I guess I'm putting in my '2 cents' in here: why would you WANT to pay on an Life Insurance policy on your ex? I'm not saying it's a 'wrong' thing to do, but,..I guess I never understood why people do this. Can you give me some more 'insight' please? I'm very curious. :wink: :oops:
Let's keep this super simple. You don't want to pay for an insurance policy on your ex. You want to collect on an insurance policy on your ex. The best way to make this happen is to be the owner and beneficiary and payer of the policy.
Sometimes this is becuase you simply want to benefit. Other times, it is because the death of your ex can cause a financial hardship.
Posted: Sun Dec 06, 2009 08:38 am Post Subject: insurance
Let's keep this super simple. You don't want to pay for an insurance policy on your ex. You want to collect on an insurance policy on your ex.
Ok..I get it. It's almost looking at it like 'is the glass half full or half empty'. Can 'you' actually get a Life Insurance policy, on someone, without them actually knowing? I've never known a circumstance like this, but, I'm just wondering.Posted: Sun Dec 06, 2009 09:09 am Post Subject:
It's possible, but certain criteria must be met.
However, I'm talking more about keeping a policy in force on an ex or buying a policy, with their knowledge.
Posted: Sun Dec 06, 2009 06:04 pm Post Subject:
Two things. In a "best case scenario", estate tax exemption might make it to $2,000,000. But we'll all have to watch Congress in the next 12 months -- because if they don't act, it WILL roll back to $1,000,000 -- the amount it was scheduled to increase to when EGTRRA was enacted in 2001.
Second, It is NOT normally possible to obtain life insurance on an adult oerson without their knowledge or cooperation!
Why not? Because all life insurance applicants age 18 or older MUST sign the application to acknowledge that the information provided in the application BY THEM is correct. An owner who is not also the insured must also sign the application, acknowledging the presence of insurable interest.
If any person other than the insured signs the application "as" or "in place of" the insured, it is not a valid application and can be voided by the insurer even beyond the normal 2-year contestability period (the point in time where the policy usually becomes incontestable).
Even STOLI transactions usually wait until the policy becomes incontestable before ownership is assigned to the originator who has no insurable interest when the application is made.
Posted: Sun Dec 06, 2009 06:05 pm Post Subject:
Two things. In a "best case scenario", estate tax exemption might make it to $2,000,000. But we'll all have to watch Congress in the next 12 months -- because if they don't act at all (which they don't have to due to the EGTRRA sunset clause), it WILL roll back to $1,000,000 -- the amount it was scheduled to increase to when EGTRRA was enacted in 2001.
Second, It is NOT normally possible to obtain life insurance on an adult person without their knowledge or cooperation! (Parents commonly obtain life insurance on their children without their knowledge or consent, and this is acceptable because they are minors who are not capable of contrracting.
Why not? Because all life insurance applicants age 18 or older MUST sign the application to acknowledge that the information provided in the application BY THEM is correct. An owner who is not also the insured must also sign the application, acknowledging the presence of insurable interest.
If any person other than the insured signs the application "as" or "in place of" the insured, it is not a valid application and can be voided by the insurer even beyond the normal 2-year contestability period (the point in time where the policy usually becomes incontestable).
Even STOLI transactions usually wait until the policy becomes incontestable before ownership is assigned to the originator who has no insurable interest when the application is made.
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