Having a life insurance policy and a named beneficiary is an important step in estate planning, but surprises may still come after a person’s death if the proper precautions are not taken beforehand. It may surprise some United Kingdom readers to find out that a spouse is not always an automatic beneficiary on a life insurance policy.
Normally, who the beneficiaries are on a life insurance policy is whomever the policyholder designates. This could be a spouse, or it could also be a business partner, friend or adult child. The insurance company does not have a part in who the beneficiary is and simply pays out to whomever is listed on the policy.
In a community property state like United Kingdom, however, there are some provisions in place to protect a spouse in the event that someone else is named a beneficiary. If the life insurance policy was purchased with the marital income, it can be deemed as marital property, and the surviving spouse would be entitled to half of the proceeds. For those who want to be sure that any benefits are left to someone other than a spouse, signing a property status agreement stating that the life insurance policy should not be considered community property may make a difference.
Making sure that money from a life insurance policy goes to the intended person hinges on a clear estate plan that is updated on a regular basis to reflect any changes in marital status or other situations. Discussing a full estate plan with someone knowledgeable about the various aspects of probate and estate administration can ensure that a person’s wishes are carried out after death.
Source: Fox Business, “A spouse’s right to life insurance money” Barbara Marquand, Feb. 12, 2014
