Saturday, June 23, 2007

How Not to Protect Your Family



As many of you already know, I was divorced from Tony when he passed away. However, we had reestablished a friendship and I was really his primary caretaker for the months preceding his death and was at his deathbed when he passed.

While we were married, smoking (his) was a huge issue. He'd spend hundreds of dollars on patches only to start smoking again within weeks. Of course, this was all done in "secret". But the problem is, when you're a person who is incapable of closing a cabinet door after you've retrieved something, it's pretty obvious where your "hiding places" are. Net net, I finally told him that if he was going to continue to smoke, he had to take out a decent life insurance policy to protect us after the fact.

He did this. He took out a $300K policy and paid the hefty smoker-premiums.

When we got divorced, our agreement stated that we each had to hold a $250K policy with the other person as beneficiary, in trust for Lucas. This was to ensure that in the event of one's death, the other parent could support Lucas in his minority.

During the week that Tony was dying, he told me that he had kept up the premiums on the original policy and that all would be ok, financially, for me and Lucas.

Lo and behold.... after he passed, I found out that his brother-in-law, an attorney, had gotten Tony to fill out a change of beneficiary form on the $300K policy. He made LUCAS the beneficiary on $250K, and his wife (Tony's sister who is a millionaire twice over) the recipient of the remaining $50K. (These are the people who have not been in touch with my son, along with Tony's other five siblings, since 2003.)

If you are a parent and don't know why this is a problem, read carefully.

If a child is the beneficiary, the money cannot be touched. Not only can't it be touched, it can't be invested. I had to go to the Surrogate Court, prove that I was Lucas' mom, and then deposit the money in a joint savings account with the court. It has, over the past 3 years, been earning about 1/2% interest.

Shortly after I discovered this, I hired an attorney to see if we could rectify the problem. It took over two years for a court clerk to determine that, in her words, I make enough money to support Lucas and shouldn't need to touch his. The judge signed off on this, had me deduct $3000 from the money to pay the attorney, and go on my merry way.

In the meantime, I've been shouldering massive therapy bills for him, as well as thousands of dollars in co-pays on his medication and other special needs expenses.

This past November I found an attorney who specializes in special needs families and also has some contacts at the Surrogate Court. She also found a prior case that mirrors our situation exactly (without the intervention of the brother-in-law, though). Right now, we are sitting on pins and needles (and two mortgages, two loans against my 401K, etc.) to await the court's decision.

All I really want to do is to invest the money and use the interest to help support Lucas. I'd rather not touch the principal and know that he has some money already put aside for college. I'm not looking to buy myself two BMWs, a mansion on the North Shore of Long Island, and a summer house in the Hamptons. Both of which Tony's sister and BIL already have.

So...the moral of the story, if you've gotten this far, is this:
Do not, under any circumstances, make a minor the beneficiary on a life insurance policy unless you are deliberately trying to screw him. Tony would be very upset if he knew what was happening now. He was clueless about this sort of thing and relied on his nasty BIL to help him do the right thing. In the end, it's Lucas who gets short-changed.