In the first case, Estate of Mark E. Patrick v. Wendy Freedman, Wendy had relinquished all claims she had to Mark’s life insurance as part of their divorce judgment. However, Mark never changed the beneficiary designation on his life insurance policy.
When he died, the plan administrator properly and lawfully paid the proceeds to Wendy who was still named as beneficiary. Of course, the estate beneficiaries went after Wendy to repay these funds.
They eventually prevailed but this whole court case could have easily been avoided if Mark had simply changed his beneficiary designation as part of his estate plan after the divorce.
In the second case, In Re Estate Of John Lett, John’s wife, like Wendy, gave up all rights to his life insurance as part of the divorce decree.
However, after becoming deficient in payment of a home loan they agreed to be jointly liable for, John agreed to name his spouse as 100% beneficiary of a life insurance policy just in case he never paid off his share of the loan. Although after he paid off the loan, he never changed the insurance beneficiary so when he died John’s ex-wife collected.
This time, the Michigan Court of Appeals said because Lett named his ex-wife as beneficiary AFTER the divorce decree, she was entitled to this life insurance policy. Another case of beneficiary designations gone awry.
These two cases only reinforce my continuous words of caution: always, always, always review and update your beneficiary designations to make sure they are consistent with your goals, objectives, and life conditions.
