If you have a life insurance policy, then hopefully you have named a beneficiary. We often discuss the appropriateness of the beneficiary designation in the estate planning meeting. But what happens if your beneficiary does not claim the proceeds or does not know they are the beneficiary ? You may be surprised!
As discussed on 60 minutes on April 17, 2016, in an interview with Lesley Stahl and Jeff Atwater, the chief financial officer of Florida, apparently life insurance companies are not paying out death benefits even if the insurance company knows the owner of the life insurance policy is dead. The companies were not following up on the decedent’s death nor investigating whether a beneficiary has received their share. MILLIONS of policies are affected and BILLIONS of dollars are involved. Involved are companies, such as John Hancock, MetLIfe, Prudential, etc. Apparently such insurance companies have deliberately disregarded evidence of death in their own file, and if a beneficiary did not file a claim, then the insurance company would cancel the policy and retain the death benefits.
In the investigation, Florida and other states have determined that life insurance companies would selectively use the Social Secuirty Death Master File (“DMF”) to verify the death to stop making payments on annuities but not use the same information to make death benefit payments. Section 627.041 of the Florida Statutes requires that every contractor of insurance settlement of the policy pay the death benefits to the beneficiary ONLY upon receipt of proof of death and surrender of the policy.
On February 29, 2016, the Florida legislature passed Bill CS/HB 1041 which amends Section 717.701 of the Florida Statutes and requires life insurers with policies in force during or after 1992 to conduct a match of all such policies with the DMF (with certain exemptions). The insurance company must, within 4 months of notice of death, take reasonable steps to pay the proceeds to the beneficiary.
ADVICE: If you have a life insurance policy, then be sure that you have a copy of the beneficiary designation with your important documents and be sure that your attorney has a copy. If you or your family believe that you may be a beneficiary of a life insurance policy for someone who has passed away, then check the unclaimed property website.
WORD OF THE WEEK: UNCLAIMED PROPERTY… Under Florida law, property that has not been properly claimed by a beneficiary or heir under Florida law or for which an owner can not be located, such property is transferred to the State of Florida unclaimed property. If the property is not claimed within a certain period, then the property escheats to the State of Florida. Thus, it is very important that, when someone dies, you search the unclaimed property website to be sure that there is no unclaimed property that could be an asset of the estate.
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