Non-Beneficiary Recovers Death Benefits Due to Unusual Circumstances – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner

by Bruce Givner on July 17, 2014

In general, (i) the proceeds of a life insurance policy do not vest with the beneficiary until after the insured dies; and (ii) only in very specific and unusual circumstances does a non-beneficiary become entitled to policy proceeds. This is an example of one case that fits these unusual circumstances.

In 1986 Thomas Walkowiak bought a life insurance policy and named his wife, Natalia Nebel, as the beneficiary. From 1986 until the couple separated in 2008, the policy premiums were paid with marital funds from joint account. After the couple’s separation, Nebel continued to pay the premiums by transferring her personal funds into the join account, even as Walkowiak stopped depositing money into this account.

For the next several years, Walkowiak continued to depend upon Nebel for financial assistance, all the while promising her that she remained the policy beneficiary. Indeed, an email sent from Walkowiak to Nebel stated plainly: “I will always try my hardest to help and support you until I die, and then you will get the life insurance.”

However, in September 2011, Walkowiak removed Nebel as the beneficiary without her knowledge and replaced her with his sister, Anne Farris, and his business partner, Hongjiao Hu. Meanwhile, Nebel continued paying the premiums.

In December 2011, Nebel filed for divorce. Walkowiak represented to her and her attorney that Nebel would remain the policy beneficiary and even went so far as to list the policy as a marital asset to be distributed in the divorce. Unfortunately, the divorce was never finalized as Walkowiak committed suicide later that month.

Still under the impression that she was the beneficiary and could use the policy proceeds as reimbursement, Nebel paid thousands of dollars for Walkowiak’s memorial and burial arrangements. However, Nebel soon discovered that she was not the beneficiary and contested the payment of the policy proceeds to Farris and Hu. This prompted Hartford, to file an interpleader action in Illinois federal court , after which Nebel and Hu filed cross motions for summary judgment.

In its ruling, the court agreed with Nebel, stating that, pursuant to Illinois law, she had acquired an equitable interest in the policy proceeds before Walkowiak died. Specifically, Illinois law provides that for a non-beneficiary to acquire equitable rights in an insurance policy, a plaintiff must establish the four elements of promissory estoppel: (1) an unambiguous promise; (2) reliance on the promise by the promisee; (3) the promisor expects and foresees reliance; and (4) the promisee relies on the promise to her injury.

The court ruled that Nebel met all four requirements as (1) Walkowiak promised and assured Nebel on several occasions she would remain the beneficiary; (2) Nebel demonstrated her reliance by continuing to pay the premiums and spending thousands of dollars on Walkowiak’s funeral; (3) Walkowiak knew Nebel was paying the policy premiums and continued to expect her to do so; and (4) Nebel relied on his promises and suffered financial injury by paying the premiums and funeral expenses. Therefore, Walkowiak could not remove Nebel as a beneficiary without her consent, and the court awarded Nebel the policy proceeds.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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