Although readers may understand that life insurance proceeds generally count toward an estate’s valuation, they may not realize the privacy implications. To protect an estate’s privacy, an attorney that focuses on estate planning might recommend naming a trust as the beneficiary of a life insurance policy, instead of specific loved ones. Otherwise, if a life insurance claim dispute breaks out among potential beneficiaries, the context could become very public.
The wisdom of this approach might have benefitted Mick Jagger, whose legal efforts to collect on an insurance policy recently became very public. Jagger’s policy covered lost income due to an unexpected cancellation of the Rolling Stones’ planned 2014 tour to Australia and Asia. Such unexpected reasons might be illness or a loved one’s death. In fact, the policy specifically listed Jagger’s girlfriend as a covered loved one.
Sadly, Jagger’s girlfriend committed suicide about two weeks before the tour. Jagger claims he was forced to cancel the tour because his grief developed into a diagnosed case of post-traumatic stress disorder. Incredibly, the insurance company denied the claim, asserting that the girlfriend’s alleged depression in the weeks before her suicide excluded her from the policy’s coverage definition of unexpected reasons. To prove her mental state, the company subpoenaed the executor of her estate, as well as her brother and personal assistant.
Ultimately, Jagger settled his lawsuit against the insurance company. However, commentators have questioned whether the privacy invasion may have influenced Jagger’s decision. Admittedly, Jagger’s situation was unique in that the insurance company didn’t want to pay the policy at all. Otherwise, naming a trust as the beneficiary of an insurance policy instead of one’s heirs is a smart way to avoid having insurance disputes between those heirs become a matter of public record.
Source: Crain’s Wealth, “Mick Jagger highlights a lesson: Insurance is part of an estate plan,” Andy and Danielle Mayoras, Nov. 19, 2014