Life insurance is a tool for transmitting wealth. But… What happens if the beneficiary(ies) predecease(s) you? This is the question Kayla sent us.
Question from Kayla, June 25, 2022
What happens in the event of the death of the designated beneficiary(ies)? Does the contract go to my heirs?
The question is interesting. When you take out an insurance contract and write the beneficiary clause, you don’t necessarily foresee that the death of the beneficiary(ies) can occur before our own. But if that happened, what would happen to the capital saved? Two possibilities.
Life insurance: the dangers that you bequeath to your heirs with a poorly drafted beneficiary clause
1. Beneficiaries by representation
My spouse or PACS partner, failing my children, born or unborn, alive or represented, in equal shares between them, failing my heirs. By choosing the standard beneficiary clause of a life insurance contract, the insured provides that in the event of the death of the initially designated beneficiary, his heirs will be able to receive the capital in his place. In the event of a beneficiary clause drafted by the insured, it is therefore advisable to indicate the name of the person chosen by adding the mention alive or represented.
Life insurance: should we be satisfied with the standard beneficiary clause?
2. Secondary beneficiaries
The insured also has the option of designating other second-tier beneficiaries who have not no relation with the first. In this case, they must be designated as follows: My spouse, failing that my heirs or Mr. Martin, by default, Mr. Hugues, by default my heirs.
Accuracy, for want of my heirs, has its utility. It is a way out for life insurance in the event of the death (or waiver) of the initially designated beneficiaries. The notary must in all cases identify the beneficiaries: the mention of default my heirs thus allows your life insurance to never find itself in a dead end, without any beneficiary of 2nd or 3rd rank…
Namely: the contract holder can also choose to modify the list of beneficiaries of his life insurance via his will! However, it is advisable to specify this to your insurer.
Pay attention to the order of the recipients, and the spelling!
For the beneficiary clause of a life insurance, the spelling and the order of the terms are very important.
Example 2. The insured writes My children, living or represented, Mrs. Martin, failing Mr. Gerard, failing my heirs. The insurer will share the capital between Mrs. Martin and the insured’s children (including their heirs). In the absence of these people, Mr. Gerard will receive all of the capital and, in the event of death, the capital will be reinstated in the succession.
To avoid errors of interpretation or the risk of dispute, it is strongly advised to take the time to properly draft the beneficiary clause and, if necessary, to seek advice from your insurer.
Whether no beneficiary has been designated or is not identifiable, the capital then enters in succession and no longer benefits from the advantageous life insurance plan.
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