They broke up in 2009, at which time Eric rekindled a romantic relationship with his ex, Patricia. The two were married later that year and lived happily ever after – until Eric passed away in 2014.
After his death, Patricia filed a claim with the administrator of his life insurance policy, which was enough money to pay off the couple’s mortgage. Much to her surprise, Patricia learned that it was not her but the ex-girlfriend, Kay, who was listed as beneficiary of the life insurance proceeds.
Later, Patricia found a form to change the named beneficiary to the life insurance policy – which was signed by Eric but never submitted. Because of this, the payout from Eric’s life insurance policy belongs to his ex-girlfriend rather than his wife.
This is not the plot to next week’s episode of your favorite soap opera, but the facts of a case recently decided by an appellate court in Texas. Sometimes fact is stranger than fiction, as they say.
Unfortunately, it is a situation that occurs far too often. People designate beneficiaries when they start new jobs, purchase new insurance policies or open new accounts – and then never think to go back and review those designations.
These types of instruments requiring beneficiary designation are governed by contract and do not pass through a person’s estate like other property, meaning that what a person’s will says is irrelevant to the distribution of the instrument.
So in the example above, even if Eric had executed a will leaving everything to Patricia, it would not have made any legal difference and the life insurance proceeds would still have passed by contract to Kay. The only way for Eric to change that was to change his beneficiary.
I recommend that people make time once a year – Jan. 1 or your birthday are great options – to review life insurance policies, pension plans, investment accounts and other documents to ensure beneficiaries are up to date. Additionally, it is also wise to review a person’s will, powers of attorney and advanced healthcare directive at this time as well.
Review should also be done after any major life event, such as a death, divorce or birth of a child. Taking just a few minutes every year to look back over these documents can save one’s family a great deal of heartache and financial stress later and can ensure that a person’s wishes are carried out upon their death. 
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Tiffany Dowell Lashmet
- Assistant Professor and Extension Specialist – Agricultural Law
- Texas A&M AgriLife - Extension Service
- Email Tiffany Dowell Lashmet
