July 31, 2018

Beneficiary Designation vs. Codicil

If a life insurance policy owner wants to ensure that their ex-spouse will not receive a death benefit, it is obviously best to remove them as a beneficiary. To do so requires that the life insurance policy owner contact the life insurance and adjust the beneficiary designation. Unless they do so, a holographic codicil disinheriting the ex-spouse from receiving the life insurance proceeds will be insufficient. 

In a recently decided appellate case, the California Court of Appeal had to decide if an ex-spouse was entitled to receive life insurance benefits where they were named the beneficiary but the policy holder's holographic codicil stated that he did not want the ex-spouse "inheriting anything from [him] under any circumstances by beneficiary designation or otherwise."

Estate of Post (2018) _____ Cal.App.4th _____
The trial court ruled in favor of the policy holder's sons but the ex-spouse appealed and prevailed.

"It is well settled that a beneficiary under an insurance policy takes by virtue of the contract of insurance rather than by the law of succession; that the proceeds do not become a part of the estate of the insured; and the law of descent and distribution has no applicability to such cases." Estate of Welfer (1952) 110 Cal.App.2d 262, 265. 

Thus, the trial court did not have the requisite subject matter jurisdiction to adjudicate the matter. Consequently, a "judgment rendered by a court that does not have subject matter jurisdiction is void and unenforceable and may be attacked anywhere, directly or collaterally, by parties or by strangers." Marlow v. Campbell (1992) 7 Cal.App.4th 921, 928.

It should be noted that the life insurance policy holder made an effort to avoid this result:

"Along with their reply, they included a declaration from decedent's estate attorney. She reported that she met with decedent on May 13, 2016. He stated that he wanted to confirm and ensure that objector received nothing from him after his death, "either by will, devise, beneficiary designation, or otherwise." He reportedly "was concerned that he may not have proactively retitled all assets, updated beneficiary designations, nor effectively unwound a short lived and immediately regretted attempt to reconcile with [objector]." The attorney assisted him in drafting the Codicil at their meeting, but he died before he could return the following week to execute a more formal version of the document. It was her understanding that, had there been more time, decedent "desired and intended that all beneficiary designations and assets passing outside of his estate be retitled to remove his ex-wife as a beneficiary."