This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

A spouse's right to life insurance money





Much to your surprise, you find out that someone else is the beneficiary on your spouse's life insurance policy.

As a husband or wife, don't you have an automatic right to the life insurance money?

It's a tricky question, and the answer is: It depends.

Generally, the policy owner - who is also usually the person who pays the premiums -- can name anyone he or she chooses as beneficiary.

Besides naming a spouse as beneficiary, a policyholder could choose another family member, such as an adult child, a business partner, or even a boyfriend or girlfriend outside the marriage.

Insurance companies don't make moral judgments about who is named as beneficiary. They simply pay out the money when the beneficiary submits a claim.

"Life insurance is a contract between the owner of the policy and the insurance carrier," says Donald Goldberg, division vice president of AEPG Wealth Strategies in Warren, N.J.

Community property states

Usually a spouse doesn't have any right to claim the life insurance money if someone else is named as beneficiary -- except in a community property state. Those states are:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

In a community property state, both spouses own equally any income earned during the marriage and any property purchased with that income. That includes life insurance policies.

In Washington state, for instance, if a spouse uses "community property" to pay the life insurance premiums, his or her spouse has the right to a portion of the life insurance proceeds. The extent to which the life insurance is considered community property depends on the type of policy, says Karolyn Hicks, a litigator with Stokes Lawrence, a law firm in Seattle.

With term life insurance, the entire policy is considered community property -- which would give the spouse the right to 50 percent of the death benefit -- if income earned during the marriage were used to pay the most recent premium. The other 50 percent would go to the named beneficiary.

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,678.70 +6.10 0.03%
S&P 500 2,057.09 +5.27 0.26%
NASDAQ 4,771.7630 +13.8840 0.29%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs