A friend suddenly passed away from a heart attack, leaving behind a $500,000 life insurance policy that he had set up long before getting married. His sister was named the beneficiary. Despite his wife’s efforts to get him to update the policy to include their 3-year-old son, he never made the change. Now, the question arises: Can anything be done to ensure the son receives some of the money, or is it up to the sister to do the right thing for her nephew?
The hard truth is that many people delay, equivocate, or simply forget to update their beneficiaries, even when prompted. Legally, the beneficiary designation is binding, and the sister is entitled to the payout. However, the moral or ethical decision lies in her hands.
The sister may argue that she is following her brother’s wishes by accepting the money, whether it’s $50,000 or $500,000. Legally, there is no debate—she is the rightful beneficiary. Morally, she could argue that her brother intended for her to receive the money, and it’s up to her to decide how to use it.
It’s easy to say that the sister should “do the right thing” and give the money to her brother’s 3-year-old son. However, this decision is complex and personal. If we conducted a poll asking, “What should she do with the money?” many might say she should give it to her nephew. But if roles were reversed, some might choose to keep all or part of it.
Lawyers often advise regularly updating beneficiaries and making a will to avoid such dilemmas. There are many reasons to “do the right thing” for a person’s family and just as many to “do the right thing” for oneself. If the sister decides to give all or some of the money to her nephew, she could disclaim the inheritance, allowing it to be distributed according to intestate laws, or set up a 529 savings plan for her nephew’s college education.
Did the friend intend to change the beneficiary designation if he had not died suddenly? Possibly. But we’ll never know. The situation is reminiscent of a spouse who keeps an ex as a beneficiary, perhaps due to forgetfulness, unresolved issues, or intentionality. Answering these questions requires hindsight and speculation.
This scenario is common with life insurance policies. A parent or spouse either forgets to change their beneficiary or chooses not to. The sister’s decision may also be influenced by her relationship with her sister-in-law. She could argue that her brother’s wife reminded him multiple times to update the policy. If he didn’t, why not? That’s the $500,000 question.
Ultimately, the sister holds the power to make a decision that could honor her brother’s family or secure her own future. Whether she keeps the money or shares it with her nephew, the choice reflects a personal balance between legal rights and moral considerations.