WLG On Our Mind

Thursday, August 18, 2016

Don't let the life insurance that covers your spouse or parent get away!

Do you know what life insurance policies cover your spouse or parent? Few of us can remember like an elephant. Many years ago, when someone came to our firm for help after their spouse or family member died, we would follow procedures offered by a large life insurance database to check and see whether there was any life insurance on the life of the person who had died. Using this database, we regularly found life insurance benefits for surviving family members. Then the insurance industry group that offered the database went away.

Family members often do not know what insurance their spouse or parents carry. Equally surprising, many people don’t know what life insurance they carry through their banks, credit unions, or association memberships. When you create a Will or Trust through a credible estate planning attorney, it is important to give your attorney a full list which details all of the insurance which covers your life.  You should also keep a copy of this list with your each copy of your living trust. In the past, too many policies were unremembered and “got away”.

Policies “got away” because insurance companies were only required to pay if a claim was submitted. Although the Social Security Death Master File could quickly reveal when insured individuals died, insurance companies willfully failed to check and held onto the benefits owed to surviving spouses, children and other family members. Insurance companies were also found to continue deducting from policy’s cash values premium payments long after insureds were dead. This vulnerability remains true in all but twenty states.

Keeping your insurance available to your family is important. One of the best ways to keep those policies available is to have them owned by either your revocable living trust or by a special estate tax resistant irrevocable life insurance trust. In addition to keeping your policies from being forgotten when you die, holding your policies through your trust can also keep their benefits available if you are incapacitated during your lifetime. Many permanent life insurance policies build cash value or allow for a living benefit for older insureds facing health challengs. For Seniors facing health challenges, both term and permanent policies may have substantial lifetime resale value. If a policy is missing, it cannot be turned into cash for your family.

Although California has been slow to pass a law requiring companies to check the Social Security Death Master File, since 2008 our Attorney General’s office has chased after insurance companies who had openly participated in this rip off scheme. The CA AG’s office found that many insurance companies were holding onto death benefits that should have been paid many years before. Not only were they intentionally remaining ignorant of when insured individuals died, many were continuing to charge insurance premiums against the cash values of deceased insureds. The AG sued, investigated more, and sued additional companies. In settling these suits, the Calfornia Attorney General forced these insurance companies to begin providing information to the State revealing outstanding policies. They created an online database. This database is incomplete and only contains data from companies that were sued, but after a loved one has passed, it still makes sense to check it.

California needs a law requiring insurance companies to check the Social Security Death Master File so that policies issued in the state of California, issued to people who have died in California and policies written on individuals known to have lived in Calfornia prior to their deaths is available. Until then, take the time to take care of your family by creating, renewing and keeping in force an up to date, attorney drafted, living trust plan to hold and control your assets. The California life insurance policy database can be found at: California Unclaimed Life Insurance Policy Database.

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