The structure of a loved one’s estate plan can substantially affect the way their assets are transferred after their death – and to whom. Beneficiary designations on everything from bank accounts to retirement portfolios can remove property from the Florida probate court’s oversight, putting those assets directly in the hands of the named beneficiaries. But what happens when the wrong person gets named on an account? Can a beneficiary designation be contested?
What is a Beneficiary Designation?
A beneficiary designation is a form an account holder completes – usually when they open the account – stating who they want to receive the value of that account or policy benefits upon their death. Depending on the form, the account owner may be able to name co-beneficiaries – who each receive a set percentage of the account upon the owner’s death – or successor beneficiaries – who receive the entire balance if the person above them in priority predeceased the account holder.
A beneficiary designation can apply to:
- Life insurance policies
- Retirement accounts (including 401(k), 403(b), and IRA accounts)
- Pensions with death benefits or surviving spouse benefits
- Transfer on Death (TOD) bank accounts
- Payable on Death (POD) accounts and policies
- Certain real property using Ladybird Deeds (though these are disfavored under Florida beneficiary laws)
The named beneficiary does not have to be a person. Account holders can designate their own trust to receive the assets, or they can name an organization or charity, for example.
Why People Use Transfer on Death and Payable on Death Accounts
When set up properly, a beneficiary designation transfers ownership of the account or pays out the benefits from the policy automatically and immediately upon death, without the Florida probate court getting involved. Because of this, they are sometimes called a “Will substitute.” They allow the deceased’s designated beneficiaries to get access to assets more quickly, without going through lengthy formal or informal probate administration. Some families – especially those with small estates – use beneficiary designations on TOD and POD accounts to replace their estate plan almost entirely, though this strategy has significant limitations.
How to Tell if a Life Insurance Policy Has an Irrevocable Beneficiary Designation
Most beneficiary designations can be changed by the account holder at any time during their lifetime. They may want to add a later-born child, remove deceased parents, or update designations following a divorce. However, although relatively uncommon, some life insurance policies have an “irrevocable beneficiary designation.” As the name suggests, an irrevocable beneficiary designation cannot be changed without the beneficiary’s consent. Irrevocable beneficiary designations can be used to:
- Compensate a company for the death of a key employee (key man policies)
- Transfer funds into an irrevocable trust
- Ensure that child support obligations are paid even after the death of a parent.
Whether a beneficiary designation is revocable or irrevocable should be apparent from the form making the designation. An account holder’s power of attorney (while the person is alive) or the estate’s personal representative (after the person’s death) can obtain copies of these documents from the insurance provider.
Can a Beneficiary Designation Be Contested?
Revocable beneficiary designations can be changed without notice to the named beneficiary. Sometimes, that can lead to a shock when the account holder dies and the funds pass to someone else. When that happens it can raise the question: can a beneficiary designation be contested?
The short answer is: yes.
In Keul v Hodges Blvd Presbyterian Church, a Florida Court of Appeal allowed a pay-on-death designation in favor of the deceased’s caretaker to be invalidated based on a claim of undue influence. The caretaker had used her confidential relationship with the deceased to get them to change their beneficiary designation. The Court said that since POD and TOD accounts are Will substitutes, they “are subject to challenge on grounds such as undue influence, fraud, duress, and overreaching.”
Florida probate law protects against the abuse of fiduciary relationships when those who are supposed to be serving the elderly instead manipulate them to the caretakers’ benefit. A beneficiary designation can also be contested for lack of capacity if there is evidence the account holder was not of sound mind when they signed the form.
How to Challenge a Beneficiary Designation
A lawsuit challenging a beneficiary designation can be filed in the Florida civil court. Many financial institutions allow account holders to change their beneficiary designations online. This creates a greater chance for undue influence or fraud, but it can also make it harder to win a beneficiary designation challenge. It also motivates banks and financial institutions to defend beneficiary designation challenges, since a bad decision could undermine their online policies and procedures.
You or your probate litigation attorney will need to get copies of the original beneficiary designation paperwork and the application to change the beneficiary, as well as any notes or recordings from the banker or financial advisor, if they exist. Then you can compare these to other parts of the deceased’s estate planning documents, and other examples of the deceased’s handwriting, voice, and signature. Where the timing or the evidence does not line up, you may be able to prove fraud or undue influence and invalidate the beneficiary designation. In addition to these forms of evidence, a beneficiary designation challenge due to undue influence involves a very similar analysis to a will challenge for the same reason.
Contesting a beneficiary designation on an insurance policy or TOD or POD account can be difficult. You need an attorney who can help you investigate, file, and prove your case. At Harrison Estate Law, P.A., our experienced estate and probate team understands when and how to contest a beneficiary designation to protect your interest in your loved one’s assets and policy benefits. We can help you investigate the grounds to challenge the document and prove your case. Contact us here or call 352-559-9828 to get help today.