Many a policyholder decides too late on the possible change in the subscription right of his life insurance policy(ies). It is therefore important to think about the possible consequences at an early stage. The authors pointed out seven specific pitfalls. Red.
If the policyholder instructs his broker to change the subscription right, it is important that this is regularly done in writing in accordance with the insurance conditions.
1. race between beneficiary and heirs
If the policyholder is already deceased at the time the insurer receives the notification, the request for amendment is null and void. In this case, the originally revocable beneficiary has already acquired the irrevocable right to the insurance benefit upon the death of the insured person (Dortmund Regional Court, judgment of 28 February 2008 – 2 O 214/07). If the broker is responsible for the delay in notifying the change, he often owes the “new” beneficiary the sum insured as compensation. Often the policyholder has named a (revocable) beneficiary to the insurance company. If, however, the beneficiary does not yet know of his good fortune, a gift, as it were, is only made after death when the insurer, as messenger of the deceased, offers the insurance benefit. If the heir knows before the insurer that a death has occurred, he can effectively revoke the messenger order vis-à-vis the insurer and the gift offer vis-à-vis the beneficiary, so that the beneficiary owes the surrender of the subscription right (OLG Hamm, judgement of 3 December 2004 – 20 U 132/ 04).
2. revocation in the will
The case is similar if the beneficiary learns of the revocation of the subscription right in the will before receipt of the offer by the insurer as messenger (BGH judgment of 14 July 1993 – IV ZR 242/92). How the case turns out in the end may depend on chance. If, however, the policyholder had already informed the beneficiary of the subscription right himself during his lifetime, this constitutes a gift contract, so that a later revocation would in any case be too late.
3. over-indebtedness due to LV in the estate
Occasionally an over-indebtedness of the estate occurs by the fact that the surrender value of the life insurance (LV) is cancelled, and “for it” a beneficiary receives the insurance sum. In this case, the administrator of the estate or the insolvency administrator will try to demand reimbursement of at least the premiums paid in by the policyholder from the beneficiary. The situation is similar if a beneficiary of a compulsory portion demands a supplement to the compulsory portion from the beneficiary because the insurance benefit had eroded the estate to the amount of only its surrender value. The basis of assessment is then often the surrender value, not the sum insured, and not the sum of the insurance premiums paid by the testator (BGH judgement of 23 October 2003 – IR ZR 252/01).
4. insolvent testator favours his widow
The Federal Supreme Court (BGH) (decision of 27 April 2010 – IX ZR 245/09) decided that the (revocable) beneficiary originally acquires his claim against the life insurance company upon occurrence of the insured event. These assets (of a term life insurance policy, therefore without surrender value) were therefore at no time part of the decedent’s or estate’s insolvency estate. With the occurrence of the insured event, the revocable subscription right pursuant to § 159 of the German Insurance Contract Act (VVG), a completely unsecured hope of future acquisition, had completely lapsed. However, the decedent’s insolvency administrator may contest the estate pursuant to § 134 of the German Insolvency Code (InsO). In this case, the beneficiary must always surrender the entire sum insured, because the action that can be contested only occurs when the insured event occurs (BGH ruling of 23 October 2003 – IX ZR 252/01). The legal effect of the creditor disadvantage only occurs with the occurrence of the insured event if the subscription right was revocable.
5. creditor of an irrevocable allottee
The case is different if the granting of subscription rights had been irrevocable and if this does not fall within the contestable four-year period before the application for the opening of insolvency proceedings, section 134 InsO. Only in this case could the insolvency administrator claim back only the insurance premiums paid during the critical period. If the beneficiary himself (also) had become insolvent, he would have a so-called right to separate satisfaction. In company pension schemes, employees are often granted an irrevocable subscription right. Nevertheless, the policyholder or employer regularly retains the rights of design, such as rescission and termination. Termination by a creditor of the beneficiary after attachment is therefore invalid (BGH ruling of 2 December 2009 – IV ZR 65/09). Even if the employer were to become insolvent, this would not change anything. However, the beneficiary may have a claim against the former employer for the exercise or subsequent transfer of the right of termination, particularly if the former employee has a “right to take over the insurance contract”. This right is attachable and can also be enforced in individual cases by way of a supplementary liquidation. The fact that the employer has long since been deleted from the commercial register is irrelevant.
6. subscription right for the (right) spouse
If only “my spouse” was specified as the beneficiary in the insurance contract, this applies in each case to the last spouse without the need for a revocation of the subscription right. In the case of non-marital cohabitation, however, the subscription right must be revoked (BGH ruling of 8 July 1996 – II ZR 340/95). If there is a divorce and the beneficiary was named, a so-called “cessation of the basis of the transaction” can at best serve as an argument for the heir to have the beneficiary return the insurance benefit. As sufficient business basis the jurisdiction regards for example a (at that time) necessary credit security or common children.
7. design tips
The (revocable) beneficiary is better protected if he receives a written deed of gift as evidence during his lifetime. However, the will had better not contradict this. If insolvency is imminent, it is better to “give with warm hands” instead of giving the beneficiary completely hopeless hope in the end by means of a revocable subscription right. A gift subject to the lifetime use of the income – except in the case of insolvency – can secure the desired result.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by courtesy of
www.kreditwesen.de (published in Vermögen & Steuern 06/2011, pages 26-27 and Vermögen & Steuern 07/2011, pages 16-17)
www.innovationundtechnik.de (published in Innovation and Technology, 07/2011, pages 36-38)
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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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