Some of the more interesting probate family feuds involve life insurance. Think that rich celebrities don't get involved in court fights like this? Think again!
Whitney Houston's father died in February 2003. He had a one million dollar life insurance policy for which she was the beneficiary. Almost six years after he died, Whitney's stepmother, Barbara Houston, sued Whitney claiming that the life insurance money was actually for her benefit.
Her attorney alleges that Whitney had agreed with her father that the money would be used to pay off a mortgage that Whitney held over John and Barbara Houston’s home. Apparently, Whitney lent her father $723,000 in 1990 and this loan was secured by a mortgage against his house, payable to Whitney. Barbara’s lawsuit claims that the life insurance was purchased to pay off this mortgage, and the remaining balance was to be turned over to Barbara.
Despite more than five years having passed since John Houston died, Whitney never turned the money over to Barbara or even released the mortgage, as she was required to do, according to the lawsuit.
So how is Whitney responding to the lawsuit? A few days ago, at the request of the attorneys, the court entered an order granting Whitney extra time to respond to the lawsuit "to determine whether this matter can be resolved without the need for time and cost consuming litigation." In other words, Whitney's lawyers are negotiating to see if they can settle the case.
My prediction from years of experience as a probate litigator: they'll settle, quickly and quietly. It makes little sense to me that Whitney's father would leave her so much money -- when she clearly does not need it -- and leave his wife without money. arbara Whitney's story does make sense.
But her story also illustrates a key mistake that many people make. Insurance policies are paid to the named beneficiary. No one should ever name a beneficiary of their life insurance policy unless they want and expect that person to keep the money. If you want your beneficiary to share the money with someone else, then name multiple beneficiaries. Or better yet, create a trust that fully sets forth your wishes. Then name the trust as your beneficiary.
It is never wise to hope that someone will do the right thing when it comes to life insurance. If Barbara Houston's claims are right, then her late husband never should have trusted his daughter by naming her as beneficiary. He could have accomplished his goals and still protected his wife. She apparently needs the money, unlike Whitney Houston.
Posted by: Author and probate attorney Andrew W. Mayoras, co-author of Trial & Heirs: Famous Fortune Fights! and co-founder and shareholder of The Center for Probate Litigation and The Center for Elder Law in metro-Detroit, Michigan, which concentrate in probate litigation, estate planning, and elder law. You can email him at awmayoras @ brmmlaw.com.Follow us on Google+