Who is entitled to a life insurance payout?

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Who is entitled to a life insurance payout?

Before my mother-in-law died, it was agreed that my sister-in-law got her share of her inheritance, prior to my mother-in-law’s death. Once she died, everything else went to the estate or to my husband. This was specifically spelled out in the Will. MIL has been deceased for over 3 years. My hubby’s uncle made him aware of a life insurance payout from his dad (my hubby’s grandfather) that went to my hubby’s mother, or now, to the estate. My hubby’s sister is insisting that she deserves half. Does she get half, or does the full amount go to the estate?

Asked on September 3, 2010 under Estate Planning, Maryland

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

I am sorry for you loss.  When I began to read your question I thought that all was going well for you since everything was done and memorialized in the Will.  It was agreed and your sister in law had to live with it.  But then you got to the end of the question and I thought: not all assets were disclosed to the sister in law prior to the agreement and the Will being drawn - whether through fraud or mistake - and she may have a valid reason to contest the Will.  Listen, if you all agreed thinking Mom had $100,000 and then you found out that she had $300,000 would you think that was fair and equitable dealing?  I would not.  She may in fact be able to prove that she gets half of the extra money, not of the whole estate.  I would suggest that you seek legal help - and I would suggest that she seek it too - and that you come to an agreement before you deplete the assets in a lawsuit.  Good luck

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

1) First, the payment from the life insurance is governed by the terms of the policy, specifically who/what is made out as beneficiary. If the policy lists your sister-in-law as a beneficiary, she gets the appropriate share; if the policy does NOT list her as a beneficiary, then the insurer literally cannot pay any portion directly to her.

2) If the proceeds are going to the estate, then from the estate, they will pass according to the will. You need to reference the will to see what, if any, distribution your sister will get. Her wishes--and yours--mean nothing in this context; the language of the will controls. Of course, that language is not always clear cut or unambiguous; if it is susceptible of more than one interpretation, you may need to go to court to sort it out.


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