Many people in California have some sort of life insurance policy. Life insurance is a tried-and-true method of providing some level of financial support for surviving loved ones after a person's death; when everything goes according to plan, life insurance can be a valuable part of a person's overall estate plan. But just like the other components of an estate plan, there is a risk to putting things on autopilot when it comes to your life insurance policy.
It is a good idea to take a look at your life insurance policy periodically or whenever you meet with your estate planning attorney, which should happen at least once every year or two, and especially when major life changes occur. Anything that could affect the named beneficiary status or changes in life that might necessitate changing or adding a beneficiary, should result in a consultation with an estate planner. For example, a divorce may cause a person to rethink naming his or her spouse as the beneficiary, but even if he or she still wants the ex-spouse to receive the life insurance benefits, he or she will still need to take legal action. In California, certain events create a legal presumption that may affect beneficiaries, even without any action by the policyholder.
In California, finding the rightful beneficiary of a life insurance policy isn't always as easy as it should be, as evidenced by the extraordinary sum of life insurance benefits that have yet to find their rightful home. In California alone, some $250 million in life insurance benefits have been acquired by the state as unclaimed property. Part of the problem is that life insurance companies haven't always been proactive or forthcoming in the payment of policy proceeds to the rightful beneficiaries; as a result, when the beneficiary doesn't come forward, he or she simply may lose out.
These are just two reasons which prove why an estate plan should leave nothing to chance. An experienced California attorney can help people get on the right track with their wills, trusts and life insurance policies.
Source: California State Controller's Office, "Protecting Life Insurance Beneficiaries" accessed Feb. 15, 2015