Life Insurance Proceeds – Who Gets Them?

Policy holders in Grand Prairie, Arlington, Fort Worth, Dallas, and other places in the Dallas – Fort Worth metroplex area may want to know the answer to the title of this article.
The Salt Lake Tribune printed an article on March 6, 2012, that dealt with this issue to a degree. The title of the article is, New Legal Battle Over Powell Insurance Policies. This article discusses what happened in the present case. At the end of this article, you will get the answer as it relates to Texas Insurance Law.
The article tells us that nine days after Josh Powell killed himself and his two sons in a horrific fire at his home in Washington state, two of his siblings filed claims on insurance policies worth $1.5 million — a move that has now prompted the insurer to ask a U.S. District Court to sort out who, if anyone, is entitled to the money.
An attorney for New York Life Insurance Co. also wants the Western Washington court to decide what should happen with a $1 million policy for Susan Powell, Josh Powell’s missing wife. The attorney also wants to know whether changes Powell made to his policy in late 2011 — naming his siblings and father as beneficiaries rather than a trust overseen by his father-in-law are valid.
Given the number and timing of changes that occurred shortly before Powell carried out the murder/suicide, “New York Life also has concerns regarding Joshua Powell’s competency at the time the beneficiary changes were made,” the court filing states. It also says “doubtful questions” exist regarding payments being made to a “slayer’s siblings and / or father.”
An attorney representing Susan’s parents, said Chuck and Judy Cox plan to file their own probate action in state court and will support the insurer’s request for District Court review.
“Clearly, under any law, he didn’t have the right to change the beneficiaries,” said the Cox’s attorney.
Local police have declined to acknowledge the existence of any policies, saying it was a civil matter.
According to court documents, Powell and his wife took out insurance policies in 2007, a little more than two years before Susan disappeared. Powell had a five-year term life insurance policy worth $1 million; he also had riders worth $250,000 on each of their sons. Susan had a $500,000 five-year term policy and a $500,000 rider.
Susan was initially listed as the sole beneficiary of her husband’s policy. The couple were equal beneficiaries of the policies for their sons.
In February 2009, Powell added a newly established family trust set up in the couple’s names as the secondary beneficiary of the policy. Under provisions of the trust, Powell’s brother Michael and Susan’s father were listed as joint trustees of the estate in the event the couple declined or were unable to administer it.
Monthly premium payments were kept current.
In October 2011, Powell altered the policy removing Susan as the primary beneficiary – a modification that came seven days after his father’s arrest for voyeurism and possession of child pornography and three days after a Washington judge temporarily placed Charlie and Braden with the Coxes. He also dropped the family trust as a beneficiary.
Instead, Powell named his brother Michael and sister Alina as his primary beneficiaries and his brother John as the secondary beneficiary. He also listed himself, his brother Michael and his sister Alina as primary beneficiaries of his sons’ policies.
He made yet another change two months later. He divided the policy’s proceeds between his three siblings, with a 93 percent share to his brother Michael, 4 percent to his sister Alina and 3 percent to his brother John. In the event his brother Michael was not living, Powell designated that the proceeds be split equally between his sister and his father, who also was named as the sole secondary beneficiary of the policy. At the same time, Powell listed himself as the beneficiary of his sons’ policies, with his brother Michael the secondary beneficiary.
Michael and Alina both contacted New York Life on Feb. 14, to request forms to make claims on their brother’s and nephews’ life insurance policies.
The lawsuit filing says New York Life is “uncertain” who should be considered the rightful owners and proper recipients of the potential payout of $2.5 million plus interest on the policies. That uncertainty begins with Powell’s role in his children’s deaths, the insurer noted in its filing and his status as a “person of interest” in his wife’s disappearance.
“If Joshua Powell is considered a slayer within the meaning of [Washington law], he is clearly not entitled to the proceeds of either the children’s riders or Susan Powell’s insurance policy,” the filing states.
On Feb. 5, Powell spread gasoline throughout his home and then locked out a case worker. Powell then killed his sons and set fire to the house, killing himself. In a statement days later, the Pierce County prosecutor said he considered Powell’s acts an admission of guilt in Susan’s death.
New York Life also says it it unsure how to handle the beneficiary designations Powell made before his death.
The insurance laws of the State of Washington will largely dictate what should happen under the circumstances.
In Texas, the Texas Insurance Code, Section 887.205, says a beneficiary who willfully participates in bringing about the insured’s death, either as a principle or as an accomplice, forfeits any right to benefits. This is also supported by Texas case law in the 1987, Texas Supreme Court case, Crawford v. Coleman.