Roulette in life and pension insurance entitlements

– When assets go to the wrong beneficiary on death -.


The race between heirs and beneficiaries in the event of death

Even in the normal case of a revocable subscription right, a notification from the insurer to the beneficiary is still required after the death of the policyholder, according to which the beneficiary is now offered the death benefit. If the heir revokes the testator’s instruction to the insurer to make this offer to the beneficiary, the beneficiary is often left completely empty-handed. If it is not expressly regulated otherwise, the beneficiary by the subscription right is in case of doubt only revocable, § 159 Insurance Contract Act (VVG). Standard forms of the insurers do not provide for the fact that the revocation can take place only very personally up to the death – thus also the right of revocation is possibly inherited unintentionally with.


Estate planning replacing chance with error?

In many cases, it depends solely on chance whether the heir has a certificate of inheritance in his hands in time to legitimise himself vis-à-vis the insurer and learns of the beneficiary’s entitlement because there is an insurance policy in the estate. It also often depends on chance whether the insurer learns the address of the beneficiary in time to then inform him about the offer of a beneficiary by subscription right. For heirs, on the other hand, the safest way is to immediately revoke any beneficiary status through subscription rights – even if this does not result from the found insurance policy.


Insurance companies do not work like detectives

The Federal Supreme Court (BGH, decision of 10.04.2013, Ref. IV ZR 38/12) ruled that an insurer is not at fault if it fails to identify the new surname of a first wife who has since remarried. As a result of this delay, the second wife had revoked the subscription right in favour of the first wife vis-à-vis the insurer in good time after her death.


Experts assume that financial institutions in Germany and abroad still hold billions in assets without heirs or beneficiaries ever having come forward. Only in some countries do such assets fall to the state. To ensure that the appointment of the beneficiary does not ultimately depend on chance alone, additional agreements are required, for example private contracts or notarial deeds.


No protection by confirmation letter of the insurer

The granting, revocation and amendment of a subscription right initially only require written notification to the insurer during the insured’s lifetime. Notification to the insurance broker or in a will would often be out of time, i.e. before the insured event occurs. A revocation can also result from a will according to judicial interpretation (OLG Jena, judgement of 21.10.2003, Az. 8 U 410/03). However, it would be a mistake to believe that a letter of confirmation from the insurer stating that “we have noted the subscription right in accordance with your notification” ensures that the subscription right has been effectively granted in every case.


Subscription rights roulette despite correspondence with insurance company

The decisive factor is that the subscription right is contained in an insurance policy and not, for example, in non-binding correspondence, § 3 VVG. If it later turns out that the estate is overindebted, the beneficiary will receive a rescission and will have to refund the insurance proceeds to the decedent’s creditors or the estate’s insolvency administrator.


Even if someone is named in the insurance policy as a beneficiary or thinks he is named – a) Life partner, (b) legal heir, c) Wife – must expect that a court will see it differently – and to the (a) legal heirs, (b) the heirs under the will, (c) the former spouse is paid when the right of option is established. Even a named and irrevocably entitled partner must expect to receive nothing – by court order – if the partnership has ended before then.


Risk of judicial interpretation in the case of subscription rights

Insurers’ forms are usually misleading if, for example, they list the legal heirs by default. One can rely then neither on the fact that these get the money, nor a testamentary appointed sole heir, because a court can see the will differently. It is therefore not advisable to use off-the-peg patterns.


If you want to benefit your former partner in any case, you must not only name him or her, but also insist that the insurance policy states that he or she should receive the money under all circumstances, even if the partnership ends. Likewise, who wants to benefit the legal heirs in any case, and not an heir appointed by will. Without additional clarification, a court may reinterpret even in meagre terms clearly formulated entitlements in the insurance policy and impute to the policyholder a different will of which he may never have dreamed.


Risk of excessive demands on the part of the insurer

The Regional Court (LG Coburg, judgement of 15.04.2014, ref. 22 O 598/13) had to decide on a “beneficiary of the legal heirs” according to a confirmation letter of the insurer. In the end, the insurance benefit was paid to the appointed heir because the “insurance policy for a private annuity insurance policy did not contain any information on the entitlement to benefits in the event of death”. Legally consistent, the regional court argued according to the burden of proof: because an insurance policy is considered a document, including the presumption of completeness and correctness of the content. However, the court even added that even if the insurance policy had clearly mentioned the legal heirs as beneficiaries, it would have judged the will to mean that the heir appointed in the will should be entitled to receive benefits.

However, the court could have ruled the other way because the insurer’s confirmation letter is also a deed. In the interpretation of the will, for example that the insurance benefit is also due to the heir instead of the legal heirs, a reference, for example in the will, would have been required in accordance with the burden of proof and the so-called implication theory of the BGH. The judgement of the LG Coburg is legally binding: Despite a possibly incorrect interpretation, it can therefore no longer be challenged.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm

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About the author

Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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