Dealing with the death of a loved one is difficult, but worries about family feuds over insurance proceeds magnify the difficulty. There are some differences in insurance regulations in the United States because each state has its own laws. You don't have to worry about having to share the proceeds in most states as long as the policy clearly states that you are the beneficiary.
The Policy Overrides the Will
If the decedent's will splits the inheritance but you are the only beneficiary of the life insurance policy, you receive your share of the inheritance and 100 percent of the insurance proceeds. The will and any life insurance policies are legally two different things. The life insurance company distributes the proceeds to the listed beneficiary without regard to the will. This doesn't mean that your sister can't try to sue you for a portion of the policy's proceeds, but courts typically rule in favor of the named beneficiary barring other circumstances.
Life insurance policies often include primary and contingent beneficiaries. A contingent beneficiary is someone named to receive the funds from a life insurance policy in the event the primary beneficiary is unable to be located, refuses the inheritance or is deceased. Even if your sister is a contingent beneficiary, entitlement to a portion of the proceeds only occurs if the primary beneficiary dies before the company pays the proceeds. If the policy states that your sister is the contingent beneficiary and there are multiple primary beneficiaries, she might receive a share of the proceeds if one of the co-beneficiaries dies. This scenario typically only occurs if the policy pays out over time instead of a lump-sum payment.
If the policy lists you by name as the beneficiary, your sister cannot make you share. If the wording is ambiguous, such as stating that proceeds go to any children, not only can your sister make you share, but you will not be given a choice. The insurance company will automatically divide the proceeds between any children of the policyholder. Even if your parent had a disagreement with your sister and you know that he meant to change the policy, if the change never occurred, your sister will receive a share of the proceeds.
Your sister can ask the insurance company to split the proceeds if she feels that she can prove that the parent was under your undue influence. For example, if after moving into your home for care, your parent changes the policy a few weeks before his death, your sister can claim that you forced him into the change. The insurance company can ask a court to decide the matter. A court will typically decide in your favor as long as you can prove that you did not influence the decision. Witness testimony and statements regarding your parent's mental alertness can help prove that your parent realized and was responsible for his actions at the time of the change.
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