Robert (Bobby) Smith was a happy man. He had just surprised his girlfriend of two years by “popping the question” at her summer family gathering. Julie was ecstatic and said “yes”. The wedding was scheduled for a year later. They agreed to let Bobby graduate from the firefighter academy and join the Chicago Fire Department. As one of the last things completed at the academy, Bobby made Julie the sole beneficiary of his life insurance benefits.
The first five months of the engagement went by quickly. But, as they started to look at locations for the wedding, Julie became very nervous and emotionally unstable. They decided to push the wedding date out another 12 months to allow Julie to “figure things out”. After another eight months things turned bad. Julie had an affair with a doctor at the local hospital. Julie was registered nurse there. Bobby was devastated, cancelled the wedding, and told Julie that he “never wanted to see her again – ever”.
Fast forward fifteen years, and Bobby was happily married to Sue, and they had four young children ranging in age from 18 months old through 12 years old. He had increased the life insurance coverage to $300,000.
Then, the unthinkable happened. Bobby was helping his father re-roof his home, and slipped and fell off the roof, breaking his neck and dying. Sue and the family was devastated.
On the financial side, Sue knew that Bobby had a life insurance policy and that he had increased the value of the policy at the birth of each of the kids, so there was some financial security. She scheduled time with the insurance agent. The agent was new, as the previous agent had left the insurance industry. After careful review of the policy and the listed beneficiary, the agent sold Sue that she and the kids were not the listed beneficiaries and therefore would not receive any benefits.
Sue was confused and could not believe this to be true. Bobby was always very diligent. But, unfortunately, it was true that Julie was still the listed beneficiary. Sue contacted Julie to let her know of the error and asked Julie to allow her and the kids to receive the life insurance benefits. Julie replied “NO”, and received the proceeds.
Summary: Life insurance contracts are legal agreements and upheld in Court. In this case, Julie was still the legal beneficiary of the life insurance contract and therefore the legal recipient of the proceeds.
Discussion: Review your listed beneficiaries on financial contracts, bank accounts and investment accounts at least annually or at any time a Life Event (marriage, child, divorce, etc.) occurs.