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Contesting a Beneficiary Designation in New York

You have just found out that you have been left out or a beneficiary designation. Perhaps you were the beneficiary and the form was changed. Or perhaps the previous beneficiary form left the account to the estate. Now it is apparent that the form was changed. After the initial anger and surprise that comes with that information, your next immediate thought is “can I challenge it?”

Beneficiary designations are a common way to leave assets at death. They are so powerful that they overwrite the will. Any financial asset can be inherited this way, including:

  • bank account
  • securities account
  • retirement account
  • life insurance
  • IRA
  • ERISA
  • 401(k)
  • Vanguard
  • TIAA-CREF

Beneficiary Designation Challenge Grounds

To contest a beneficiary designation, you would have to show one or more of the following factors, as seen in Vermylen v. Genworth Life Ins. Co. of NY:

Lack of Mental Competency – to prove that the decedent was so affected as to render him wholly and absolutely incompetent to comprehend and understand the nature of the transaction. Or that the beneficiary designation was the result of a condition, such as a psychosis, that created impulsive or irrational behavior beyond his control.

Non-Compliance With Institutional Contract – a beneficiary designation can be declared invalid if it was not executed in accordance with the terms of the portfolio’s provider’s contract. Strict compliance is not required, substantial compliance is enough for the beneficiary designation to survive. This is explained in Lincoln Life v. Caswell.

Undue Influence – a beneficiary designation can be overturned if the decedent was unduly influenced to change their beneficiary form. The factors of undue influence are:

  1. A significant change of testamentary plan or intention
  2. Deteriorating physical or mental condition
  3. The proponent of the will took an active role in procuring it
  4. The testator acted without independent advice and in secret

Here’s more information about New York undue influence factors.

Fraud – fraud can either mean that the beneficiary designation was slipped to the decedent under the guise of a different document, or the decedent signed the beneficiary form relying on lies told to him by the people benefitting.

Effective Trust – you can also claim that the beneficiary designation constitutes an effective trust. You can be claimed that the person who is designated as a beneficiary is holding the funds for the other family members. You will not be able to testify to what the decedent has told you in that regard. You’d have to rely on testimony from the other interested parties, who may have an incentive to be untruthful.

If you are thinking about contesting a beneficiary designation in New York, call the Law Offices of Albert Goodwin at (212) 233-1233.