Useless Wills.

“Now just a minute,” Tiffany said. She noticed that her hands were shaking. “You’re telling me that Daddy’s Will doesn’t do what it says it does?”

“I’m sorry to say that that’s right,” answered Trish, the lawyer.

“But, it says right here that I get the $500,000 life insurance policy number 1234555 with Universal American Mutual Mega-Huge Life Insurance Company. If that doesn’t mean I get that life insurance policy, what does it mean?” No wonder why stressed out people wring their hands – to keep everyone from seeing their sparkly diamonds shake.

“Well, if the policy had been payable to your father’s estate, or to you as the beneficiary, then you would receive the proceeds from that policy. Unfortunately, the beneficiary of the policy is your step-mother,” said Trish slowly and carefully, allowing the information to sink in.

“But she and Daddy were hardly even married when he died! How can she get my life insurance policy?! I need that money, she didn’t! She got the house and the bank accounts and the Rolls and other stuff. She doesn’t even love him! After he had his first stroke, she put him in that awful place. She’s been living in the house with the pool boy ever since. How can we fix this?”

“There’s no easy way to do that,” Trish said soothingly. “In fact, it is unlikely that a lawsuit against your step-mother, the insurance company or your father’s estate would be successful. Your father had his estate named as a beneficiary when he prepared this Will back in 1999. If he had left it that way, you would be receiving the life insurance through probate. But he changed it to your step-mother in September of 2003. When was his first stroke?” asked Trish.

“In May of 2004.”

“Before his first stroke, was he competent?”

“Yes. He was as sharp as a tack,” Tiffany assured Trish.

“When was that?”

“January… No, February of 2004. My cousin Tabatha’s wedding. He out danced us all and told jokes all night,” answered Tiffany. “The stroke a few months later was really a shock.”

“When your father changed the beneficiary to your step-mother after he made his Will, we have to presume that he knew what he was doing. It shows here that your father changed the beneficiary to your step-mother in September of 2003,” Trish stated, gently sliding the Change of Beneficiary form across the conference room table.

Tiffany’s rings rapped against the glass-topped table as she put her hand on the form. “But, Daddy’s Will is really clear. It even gives the policy number and everything. Why doesn’t it control the policy?” she asked.

“Because the life insurance policy is a contract between your father and the life insurance company. The purpose of the contract is to pay the death benefit to the person specified in the contract when the owner dies. The insurance company has to follow the terms of the contract in paying out the death benefit. The contract your father had requires the insurance company to pay the death benefit to your step-mother. Your father’s Will does not change that,” explained Trish.

“But, what about the IRA?” countered Tiffany. “It’s only $217,000. But Daddy’s Will gives it to me as well. What about that?”

“Well, the same rules apply to the IRA’s as apply to life insurance policies,” began Trish. “Because your father never changed the name of the designated beneficiary, the person he originally named as the beneficiary is the beneficiary of that account as well. Again, that is your step-mother. ”

“Is there anything we can do?” asked Tiffany, crestfallen.

“I can give you the name and phone number of a couple of probate litigators. This is not something I can help you with. Given the expense and the slim chance of success, however, I implore you to proceed very cautiously before you invite litigation into your life for the next several years,” offered Trish.

This entire conversation and the subsequent possible litigation could have been avoided had Tiffany’s father’s estate plan be drafted more carefully or if her father had kept his life insurance and IRA beneficiaries consistent with his stated intent in his Will (or vice versa).