Life insurance beneficiaries: who to name and why

Life insurance beneficiaries: who to name and why

A recent Tennessee Court case has provided new guidance for those of us with life insurance plans. The case is Estate of Charles Allen Lane et al. v. Amanda Davenport Courteaux. In Estate of Lane, the court had to decide whether a portion of the proceeds should be paid to one of the two named beneficiaries on the policy, or to the son of the policyholder. The latter, who was not a named beneficiary, produced a Will which stated that the policyholder’s intent was that he be the beneficiary of the funds.

In this case, the policyholder was married and was the mother of one young son. She was diagnosed with terminal cancer and faced with certain end-of-life decisions. Before her illness, she took out a life insurance policy in her name amounting to $600,000. On that policy, she named her husband as the sole beneficiary. A short time after her cancer diagnosis, her husband received a diagnosis of terminal cancer and was not expected to outlive his wife. Faced with this tragic situation, the policyholder added her sister as an equal second beneficiary on her life insurance policy. While the policyholder did not discuss the policy or tell her sister that she had been named a co-beneficiary, the court later found that the sister was aware of the policyholder’s financial situation. Moreover, the policyholder was said to have made clear to her sister her desire that her son is taken care of. The court also found that the policyholder told the sister that there would be money which she would be able to use to take care of the policyholder’s son after she was gone.

After she had made the changes to her life insurance beneficiaries, the policyholder passed away suddenly.  It wasn’t until her death that her husband found out for the first time that he was no longer the sole beneficiary on her life insurance policy. Upon this realization, he filed suit against the policy holder’s sister and the life insurance company stating that the policyholder intended for the money to be used for the benefit of the child. Shortly after filing suit, the husband also passed away.

At trial, the husband’s estate and the son produced a handwritten document through which the policyholder divided up her assets among her family and friends. Through this paper and the testimony of family and friends, the son and the estate attempted to prove that the policyholder’s intent was for the son to be the beneficiary of the policy.

While the court seemed sympathetic to the son and the estate’s argument, it found that the named beneficiary on the policy is the individual that will receive the funds upon disbursement. The court states, “no amount of evidence regarding her intent, however, changes the fact that she named [the sister] as a co-beneficiary. Because an insurance policy is a contract between the insured and the insurance company, and because no legal mandate required [the policyholder] to name someone other than [the sister] as a beneficiary, [the sister] is entitled to the remaining proceeds of the policy.”

The point here is this. The court makes clear that a life insurance policy is a contract between the policyholder and the insurance company. Neither a Will nor any other document stating a policyholder’s intent will change the status of the beneficiaries listed in the policy. If your intention is to leave all or part of a life insurance policy to someone not named as a beneficiary, it will be up to those receiving the funds upon disbursement to make sure your wishes are fulfilled. There are much safer, and more efficient ways of providing for those you love than simply hoping that everyone does the right thing and follows your wishes. Leaving your assets to be distributed and divided as you intended without specific guidance can cause difficult and extended issues between family and friends after your passing.

Preparing to take care of your family after you’re gone is not something that anyone should attempt alone. The policyholder’s story in Estate of Lane is a prime example of this. Estate planning provides unique challenges that require expertise and experience.  And unfortunately, common sense and good intentions don’t always win out.

Give me a call or send me an email at, and let me help you protect those you love after you’re gone.

Butler, Vines and Babb is a leading law firm in Knoxville, TN, with extensive litigation experience in Medical Malpractice LawBirth Injury LawTrucking Accident LawPersonal Injury Law, and Business Law. Contact us today at or call 866-701-9631.
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