Question

In: Accounting

Nick is the insured and owner of a $300,000 whole life policy. He has named his...

Nick is the insured and owner of a $300,000 whole life policy. He has named his sister, Julie, as primary beneficiary of the policy and his cousin, George, as the contingent beneficiary. Nick retained the right to change beneficiaries (i.e., revocable). Which of the following statements is incorrect?

a. Nick could make George the co-beneficiary of the policy, without having to get permission from his sister.

b. As a revocable beneficiary, Julie only has an expectancy of policy benefit not a vested right.

c. As owner of the policy Nick will need to get permission from Julie to assign the policy as collateral for a loan.

d. If Nick was to make Julie the irrevocable beneficiary of the policy then his unlimited right to subsequently assign the policy would change.

Solutions

Expert Solution

Answer : The statement (C ) is incorrect because as a owner of the policy nick need not get any permission from julie to assign the policy as collateral for a loan .

The statement (A) is correct Nick in his place can assign anybody as co beneficiary without having permission from his sister .

The Statement (B) is also correct because as a revocable beneficiary she has an expectancy benefit and a vested right in the policy untill pr unless nick revokes the same .

The Statement (D) is also correct because if Nick assigns julie her sister an irrevocable beneficiary ,then it will restrict the rights of nick to further reassign the policy.

For detailed discussion what a  beneficiary ,revocable beneficiary and a irrevocable beneficiary is,see below

Beneficiaries are people or entities you designate to inherit from your estate when you pass. You can change your beneficiaries at any time, unless it is for an irrevocable trust, which cannot be modified in this way.

Only people or certain types of entities can legally inherit from your will or other estate instrument. For example, you can't leave anything to your beloved pet because animals don't have the legal capacity to accept a gift. Likewise, if you leave property in your will to a minor, you need a legal guardian who can hold the property for the child until they reach the age of majority. You also can specify in a trust that the child doesn't receive the gift until they reach a certain age.

Your beneficiaries will receive the assets from your estate that you want them to have, but whether they're primary or contingent beneficiaries determines who gets what.

With a revocable beneficiary, you can name an individual or several people or an organization as the beneficiary on your contract but because it is revocable you can change it at any time.

Irrevocable beneficiary is an individual designated as beneficiary of an insurance policy, whose interest cannot be revoked without the individual's written consent.


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