Can A Beneficiary Be Removed From A Life Insurance Policy?

There are several types of life insurance beneficiary designations, each serving different purposes. Understanding these designations is essential to ensure your death benefit goes to the right people, avoids legal complications, and protects vulnerable loved ones. Proper designations help prevent disputes, minimize taxes and delays, and adapt to life changes like marriage, divorce, or the birth of a child. You can even support charitable causes or set up a trust for greater control over how funds are distributed. 

In this article, we’ll discuss who and what can be named as a beneficiary, explore the different types of life insurance beneficiary designations, and explain if you can remove a beneficiary from your policy.

Who Can Be Named as a Beneficiary?

You can select a wide range of individuals or entities as beneficiaries in a life insurance policy, depending on your personal and financial goals. Family members, friends, domestic partners, and business partners are all frequently named beneficiaries. Legal entities or groups as well as trusts can also be beneficiaries.

Minors and pets cannot be directly named as beneficiaries. For minors, the death benefit is typically held in a court-appointed guardianship until they reach adulthood. A trust or custodial account may be a better option. Setting up a trust for the care of pets is best if you want them to receive the death benefit.

Can Beneficiaries Be Changed?

All beneficiaries are ultimately classified as either revocable or irrevocable, regardless of their type (more on this next). These classifications determine whether the policyholder can change or remove a beneficiary designation without that beneficiary’s consent. 

The most common designation is the revocable beneficiary. The policyholder can change or remove revocable beneficiaries at any time without their permission.

Irrevocable beneficiaries are less common and provide greater security for the beneficiary. Neither the life insurance policyholder nor a Power of Attorney can change or remove the beneficiary without their written consent. Irrevocable beneficiaries are typically named in legal agreements, such as divorce settlements or business insurance policies (e.g., a key-person policy).

Understanding Beneficiary Designations

When thinking about the different types of life insurance beneficiaries, the first to come to mind are those that are requested on standard designation forms: primary and contingent. More complex designations generally require additional instructions, custom forms, or legal consultation. If needed, these can be added through supplementary documents or riders. 

Can you remove someone from a life insurance policy? It depends … let’s take a look at the different types of beneficiary designations and if removal is possible and wise.

Primary Beneficiary

The primary beneficiary is the person (or entity) first in line to receive the death benefit. The policyholder can change or remove a primary beneficiary at any time provided it’s a revocable beneficiary. If it’s an irrevocable beneficiary, the change requires the beneficiary’s written consent.

Contingent Beneficiary

Those named as contingent beneficiaries receive the benefit only if the primary beneficiary is deceased or unable to claim it. The contingent beneficiary can be replaced or removed without legal issues, provided the policyholder follows the insurance company’s procedure. Updating contingent beneficiaries is essential after major life changes. Note, this type of beneficiary may also be called a secondary or backup beneficiary.

Per Stirpes Beneficiary

If a beneficiary predeceases the policyholder, their share is passed on to their descendants. If you remove a per stirpes beneficiary, such as a child, their entire branch is disinherited, including their descendants. The removal requires a detailed review to ensure your intentions are clear. Pronounced stir-peas, stirpes is Latin for “by branch.”

Per Capita Beneficiary

The death benefit is divided equally among all surviving beneficiaries at the same level of relationship. Removing specific individuals from a per capita beneficiary will redistribute the death benefit among the remaining per capita beneficiaries at the same generational level. Capita is Latin for “by head.”

Trusts as Beneficiaries

A trust can be named as the beneficiary, allowing for more control over how the death benefit is distributed. A trust can be especially helpful for minors or for estate planning. A trust can be removed as a beneficiary, but you must formally update the beneficiary designation and follow legal guidelines. Be cautious, as removing a trust without a clear replacement could complicate the distribution, especially if minors are involved.

Charitable Beneficiaries

You can designate a charitable organization as a beneficiary to leave a legacy donation. A  charitable organization can be replaced or removed just like an individual beneficiary. This is common if the policyholder’s philanthropic goals change or if the charity no longer exists.

Estate as Beneficiary

The death benefit is paid to the estate, becoming part of the probate process. This is generally less favorable due to possible delays and tax implications. Naming your estate as a beneficiary can be undone, but it’s important to name a new beneficiary to avoid having the death benefit tied up in probate. Removing the estate as a beneficiary is a good idea if you want the benefit to pass directly to loved ones.

How to Remove a Beneficiary from a Life Insurance Policy

Removing a revocable beneficiary from a life insurance policy is simple and straightforward.

1. Contact your life insurance provider.
2. Complete a Change of Beneficiary Form (often available online or through the insurer).
3. Submit the form, ensuring it’s properly signed and dated.
4. Confirm with the insurer that the change has been processed. 

Removing an irrevocable beneficiary is much more complex because it requires their written consent. (In rare cases, an irrevocable beneficiary can be removed without consent through a court order if there is evidence of fraud, coercion, or other legal violations.)

1. Obtain the written, notarized consent of the irrevocable beneficiary.
2. Submit the consent along with a Change of Beneficiary Form to the insurer.
3. The insurer may require additional documentation to ensure the change is valid and uncontested.

Can Beneficiaries Be Changed After Death?

Beneficiary designations on a life insurance policy cannot be changed after the policyholder’s death. Once the insured passes away, the most recent valid beneficiary designations on file become final and legally binding. This rule ensures the death benefit is distributed as intended, preventing fraud and manipulation. 

If a primary beneficiary has passed away and there’s a contingent beneficiary, the benefit will go to the contingent. If no contingent beneficiary is listed, the death benefit typically becomes part of the policyholder’s estate and may go through probate. To avoid complications, it’s essential to keep beneficiary designations up to date.

Can You Contest a Beneficiary on a Life Insurance Policy?

Can family contest life insurance beneficiary? Yes, but anyone contesting a life insurance beneficiary will have to take legal action and present strong evidence. Common reasons include fraud, undue influence, lack of mental capacity, forgery, or violation of legal agreements like divorce settlements. 

Beneficiary disputes are handled in court, and the insurance company withholds the payout until the case is resolved. Errors or outdated designations can also lead to challenges, especially if the policyholder failed to update the beneficiary after a significant life change. 

What Can Override a Life Insurance Beneficiary?

Certain situations, such as divorce decrees, court orders, or state laws like community property and slayer statutes, can override a life insurance beneficiary. Legal obligations from business agreements or federal laws like ERISA (Employee Retirement Income Security Act) can also take precedence. 

If the policyholder lacked mental capacity or was coerced into changing the beneficiary, a court may invalidate the designation. Additionally, if no valid beneficiaries remain, the death benefit typically defaults to the estate and goes through probate.

Understanding the nuances of life insurance beneficiaries is important, and having your affairs in order while you are of sound body and mind can provide a great deal of comfort to you and your loved ones. If you have life insurance questions or are ready to set up a new policy, get in touch with our team. At Independent Insurance Associates, we aren’t committed to one company so that we can help you get the coverage that meets your specific needs.