By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Estate Planning & Probate Litigation Attorney

The topic/issue/question of beneficiary designations comes up often. The correct designation of beneficiaries is a critical consideration in estate planning to avoid estate probate litigation…here’s why I’m going to use a case study to explain.

A family member (brother) received $100,000 in life insurance money as the sole beneficiary of his late father’s policy. However, Dad’s will left everything in his Estate equally between the 2 brothers. The value of the Estate is $300,000 (excluding the Life Insurance) and is in probate. His debts are $200,000, so under the will each child will get $50,000. The one brother doesn’t think Dad envisioned things working out like this, with one son getting $150,000 and the other $50,000. He believes dad expected the life insurance money would just go into one big pot. So, the issue is are the life insurance proceeds have to be used to pay Dad’s debts? Is the one brother required to give one-half of the insurance proceeds to his brother?

Unfortunately the law says the brother is not obligated to divide the life insurance money with his sibling. Those funds are not included in the probate estate and are not (as a general rule) available to Dad’s creditors unless undue influence, fraud or other grounds exists to contest the beneficiary designation. If not, the one brother loses out. It’s a family issue, and obviously a sensitive one.

The brother named as the beneficiary of the life insurance will have to decide if he has a moral obligation to share the insurance proceeds. His decision will likely depend on their relationship, as well as his understanding of everyone’s financial needs. For example, if he has three kids going off to college and the other has none, he may feel justified in keeping the money. But maybe not. He may agree that dividing up the insurance money with his brother is the right thing to do. The brother won’t know until he is asked.

But, the law is clearly in favor of the brother who is the designated beneficiary. BUT!!! Under the right set of facts a successful challenge is possible, but it will be a tough case.

To discuss your NJ Estate Planning & Probate Litigation matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at  Please ask us about our video conferencing consultations if you are unable to come to our office.