Life insurance
 

Is life insurance part of the inheritance?

It often happens that the testator has not named his heirs in a life insurance contract, but other persons as beneficiaries. It is not uncommon to find cases in which the life insurance was taken out years or decades ago and the testator did not even think about the beneficiaries in the insurance contracts. The insurance benefit may then not be included in the estate and the heirs are not entitled to it. Even if the testator and the beneficiary have not been in contact for many years, the life insurance policies adhere to the beneficiary's name in the insurance contract and pay the insurance benefit not to the heirs but to this person.

Can the heirs revoke the entitlement to benefits?

Under certain circumstances, however, it is possible to draw the insurance benefit to the estate and secure it for the heirs. It is true that according to case law the heirs cannot cancel or revoke the entitlement to benefits after the death of the policyholder. However, under certain circumstances, the heirs can revoke the offer to conclude a gift contract even before a corresponding gift contract is concluded. The legal assessment behind this is somewhat more complicated and will be explained later.

As a result, the case law of the courts means that there can be a real race against time between the heirs and the beneficiaries. As soon as the insurance benefit has been paid out to the beneficiaries without the gift offer having been effectively revoked beforehand, the heirs usually have no further claim against the beneficiary. If life insurance contracts exist, it should therefore be checked as soon as possible whether persons other than the heirs were named as beneficiaries. If this is the case, the beneficiaries should be contacted immediately and a corresponding offer to conclude a gift contract should be revoked. The revocation should be sent to the beneficiaries immediately and the matter should not be discussed with them beforehand by telephone or e-mail, as there is then a risk that the beneficiaries will contact the life insurance company immediately in order to accelerate the payment or to conclude the gift contract.

The legal background is the following: The jurisdiction distinguishes between the cover ratio and the donation ratio (value ratio). The cover ratio concerns the relationship between the insurance company and the beneficiary. The allocation relationship concerns the relationship between the beneficiary and the disposing policyholder and/or its heirs.

While after the death of the policyholder, the entitlement to receive benefits can no longer be revoked by the heirs and the beneficiary can therefore in principle demand payment of the insurance benefit from the insurance company (cover ratio), a completely different question is whether the beneficiary is entitled vis-à-vis the policyholder's heirs to actually retain the benefits of the insurance company.

The beneficiary can only retain the insurance benefit vis-à-vis the heirs if there is a legal reason for this, e.g. if a contract of donation has been concluded. As a rule, no contract of gift has been concluded during the lifetime of the policyholder. The contract of gift is then usually concluded in such a way that the insurance company offers the beneficiary an insurance contract after the death of the policyholder. For this the life insurance is usually assigned by the policyholder, because if a policyholder of the insurance opposite an entitled person for the case of death indicates, then the iurisdiction sees therein at the same time the implied order to the life insurer to bring to the entitled person an offer for donation. An insurer commissioned with messenger services in this respect usually fulfils this task by paying the insured sum to the beneficiary, because this implied offer of gift by the deceased is expressed in it. The beneficiary can accept this offer impliedly by accepting the money (BGH, decision of 21 May 2008; BGH decision of 10.04.2013 - IV 38/12).

However, according to case law, it should not be sufficient for the beneficiary to learn of his or her entitlement to benefits in any way. For a contract of gift to come into existence, the insurance company must submit a corresponding offer. The relevant decision of the Federal Court of Justice (BGH) of 21.5.2008 states: "If the third party becomes aware of his entitlement to benefits after the death of the policyholder and therefore demands the death benefit from the insurer, a gift offer from the policyholder will not be sent to him simply because the insurer requests documents to examine the facts of the case (in this case the sending of the insurance policy and a death certificate).

If the gift contract has been validly concluded, the provisions of inheritance law do not apply in this respect (BGH, judgement of 21 May 2008 - IV ZR 238/06, BGH decision of 10.04.2013 - IV 38/12).