Utilizing a power of attorney (POA) document can be a valuable legal instrument for ensuring that life insurance proceeds are rightfully received by intended beneficiaries. However, comprehending its complexities is not a straightforward matter. Improper utilization of a POA or actions taken by an agent that do not align with the best interests of the grantor may unjustly strip beneficiaries of their rights.
Understanding the Power of Attorney (POA)
A power of attorney (POA) is a legal document that designates another person (the agent) to act on behalf of the principal, grantor, or donor in cases where they are unable to act independently.
In situations where the original beneficiaries are deceased, a POA can serve as a useful tool. An agent holding a POA may select a new beneficiary. However, once the insured individual passes away, the authority of the POA ceases, and the agent becomes unable to make any further changes. If a life insurance policy lacks a designated beneficiary, the insurer will transfer the payout to the decedent's estate. Subsequently, it will undergo probate and be distributed in accordance with any existing will.
Can the POA Holder Become the Life Insurance Beneficiary?
It is possible for a POA holder to be designated as the beneficiary of a life insurance policy if the insured chooses to do so. Frequently, the spouse or a child of the insured is granted power of attorney. As long as the agent acts in the best interests of the policy owner, there is no conflict of interest.
However, unless explicitly stated in the agreement, an agent with a power of attorney cannot name themselves as the beneficiary of the life insurance policy.
Can an Agent Utilize the Power of Attorney to Cash in the Life Insurance Benefit?
If the POA agreement explicitly authorizes the action and specifically mentions the life insurance policy, the agent may cash in a life insurance policy on behalf of the policy owner. In such instances, the agent is bound by fiduciary obligations each time they act on behalf of the insured.
Can a POA Holder Revoke a Life Insurance Policy?
While an agent with a POA possesses various powers, they cannot terminate a life insurance policy unless explicitly granted this authority in the POA form. If you suspect that a policy in which you are a beneficiary may have been unjustly canceled or converted, it is advisable to consult with a lawyer to explore all possible avenues.