Can a Spouse Override a Beneficiary on a Life Insurance Policy?

The question of whether a spouse can override a beneficiary on a life insurance policy often arises, especially in community property states like California (CA) and Washington (WA). This article explores the intricacies of this issue, highlighting the legal and practical aspects involved.

The Fundamentals of Community Property

In a community property state, any property or asset acquired during the marriage, with a few exceptions, is considered jointly owned by both spouses, regardless of whose name is on the title. This sharing is a fundamental principle that applies to nearly all forms of property, including life insurance policies.

Impact on Life Insurance Policies

When a life insurance policy is purchased with community funds, it generally becomes a community asset. This means each spouse owns a one-half undivided interest in the policy. If the owner insures themselves and names a beneficiary, that beneficiary is designated in the owner's sole discretion. However, this interest can be affected in certain situations.

For example, if a husband uses community property funds to purchase a life insurance policy naming his mistress as the beneficiary, and he subsequently dies, his half interest in the policy proceeds would pass to his mistress. This leaves the wife with the other half of the proceeds, which she has the discretion to control in her sole and absolute discretion.

Exceptions and Legal Considerations

There are exceptions to this general rule. If the wife has knowingly consented in writing to her husband naming a different beneficiary, she effectively disclaims her half interest in the proceeds and agrees to let the husband control that portion. This can be a complex situation, requiring careful documentation and legal guidance.

Expert Insight

According to Richard Wills, a retired probate attorney originally licensed in California, Washington, and who has successfully litigated this issue on several occasions, the answer can be nuanced. Here is a summary of his expert view:

In the circumstances described, the answer is indeed YES!

Conclusion

The final answer hinges on the specific circumstances and legal agreements in place at the time of the husband's death. If the wife retained her half interest in the policy proceeds but wishes to ensure its proper distribution, she must carefully consider the implications of all legal and written agreements.

When it comes to life insurance policies, the owner is typically the one with the ultimate authority to change the beneficiary. However, in a community property state, other parties may have vested interests, particularly when funds used to purchase the policy are deemed community funds.

For detailed legal advice tailored to your specific situation, it is essential to consult a professional familiar with both your state's laws and the intricacies of life insurance policies.