Can MetLife Override Intestate Succession of Pre-Deceased Beneficiaries

Question

My grandma has a Life Insurance policy that she started around 1983 with Horne’s (now Macy’s) until 2003 when she retired.

The names Beneficiaries were my dad and grandfather (her husband). Both are now deceased. My grandmother survived both of them until Jan 2019.

In the state of Pennsylvania, there is a specific Intestate Succession that dictates grandchildren come before Siblings in inheritance.

I filled out beneficiary paperwork and submitted to MetLife, and spoke with MetLife several times by phone.

I was told by MetLife that in the case of pre-deceased Beneficiaries MetLife applies Federal inheritance law, thus Siblings come before: Will statements or Intestate Succession.

We have an Estate open as well as an original Will. The only mentioned of any Sibling inheritance was only for a sister I really know of that is also now deceased.

I told MetLife I cannot legally confirm if my grandma has other siblings although there is a lady that started coming around when my grandma became ill that said she was her sister.

I am concerned some unwelcome Siblings or “sister” are going to inherit this Life Insurance totally undeserving because of MetLife whack policy. And my grandma is not here to defend herself, so I am doing all I can.

Is there anything MetLife is doing that is not kosher?

Do I have any rights in state law that can override their “Federal” rules.

Any other tactics or thoughts that I can look at to help remedy this?

I am calling their records dept on Monday to request documents that provide my grandmas signature stating the PA Succession is overridden and she agreed to that when the policy was opened. Not sure if they will provide.

Answer 1

Benefits from life insurance can go directly to a named beneficiary: there can be primary and secondary beneficiaries, and co-beneficiaries. If all of the primary beneficiaries are all dead, the company will check on the secondary beneficiaries. If there are no surviving secondary beneficiaries, the benefits go to the estate and are subject to probate. If a person is not specifically named as a beneficiary, the insurance company does not get involved in figuring out who gets the money. So then, as part of the estate, the benefit (and anything else) would go to whoever the state's intestacy laws dictate. Collateral heirs (sibling, parents, aunts, grandparents) are elegible only if there are no surviving descendants.

If (as it appears) this is not regular life insurance but rather an ERISA-regulated employment benefit, the situation changes. That law explicitly supersedes all state laws related to employee benefit plan. However, it explicitly does not supersede state law pertaining to insurance. One path would be to make the insurer prove in court that this is an ERISA plan (the burden is on the insurer, Zavora v. Paul Revere Life Ins. Co., 145 F.3d 1118). If it is an ERISA plan, then you have to get a lawyer to challenge their finding. You should know that you have to submit all of the evidence to the insurance company first, and the legal presumption ("deference") is that the insurer is correct. There is a very long article which addresses the legal matter of entitlement to survivor benefits under ERISA. Nothing therein suggests that the federal government dictates an order of succession. This report to the Sec'y. of Labor, about beneficiary designations under ERISA, noting that "The complexity of the rules under ERISA may, in some cases, lead to beneficiary designations that do not accurately reflect the participant’s intent". The document (which reports on common practice in the industry) notes that

If no beneficiary designation is made, the beneficiary is usually determined by the terms of the plan document. Retirement plan documents typically include default beneficiary provisions that apply in the event the retirement account owner fails to designate a beneficiary. The most common order used for a default is the current spouse, children, parents, siblings and the estate.

It is therefore possible that the insurance company included language in the plan that places siblings before the estate. Federal involvement could be a provision in the law that allows an insurer to specify default beneficiary provisions in case the insured's elections are deceased. (It is also possible that the insured made these elections decades ago and didn't understand the consequences of not mentioning grandchildren). Assuming that siblings precede grandchildren according to the language of the plan, then this is required by federal law in the sense that that is what the plan says, and the law requires the insurer to follow the plan (since the insured is assumed to have read and understood the plan, even though that is often not actually the case).