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In the following article, Paul Deloughery discusses a dispute over life insurance policies.


Todd Chance was found dead in an almond orchard near Shafter in August 2013. The police originally suspected that his wife, Leslie Chance, had murdered him. They held her for questioning for a few days, but then released her with no charges filed and without comment. Meanwhile, four life insurance policies totaling around $500,000 have still not paid out. You can read the news story here.

According to the news story, one of the life insurance companies filed a Complaint in Interpleader – meaning that they have sought to deposit the policy proceeds with the court and let the beneficiaries fight over who gets them. When there are competing beneficiaries to life insurance proceeds, the life insurer may hold the money until it gets resolved. Usually, they will go the interpleader route, so they can wash their hands of the situation and not be entangled in ongoing litigation. (In the case of Todd Chance, the litigation between Leslie and Todd’s parents is still going on years later.)

 

In the case of Todd Chance, Leslie claims that she was the beneficiary, but that she was going to use the money for their daughters. (I can’t tell from the news article whether Leslie was the mother of the children, or if she is a step-mother. That would be a relevant fact.) As a probate lawyer, I can tell you that it’s “possible” that Leslie intended to hold the life insurance money for the minor children. But if that were the case, she and her husband took zero steps to make sure it actually happened. A parents doesn’t just “hold” money for their children. That would be what’s called an oral trust, and it has many problems, such as:

  • If Leslie files bankruptcy, is the money subject to her creditors?
  • If Leslie dies, does the money become part of her estate? And who becomes the successor trustee?

 

If Leslie and Todd actually wanted to have the life insurance money go to his (their?) children, they should have created a trust for that purpose. The fact that they didn’t makes me doubt very much that Leslie’s intention was to benefit the kids and not her.

Frankly, I’m a little shocked that the two sides in this case haven’t settled. One side is going to win and the other is going to lose. The fact that they haven’t reached a mediated agreement tells me that one or the other side doesn’t want to settle out of principle. Either the parents can’t stomach Leslie getting the benefits of their son’s life insurance policy. Or Leslie (who was a school principal) doesn’t want any appearance of having committed something as horrible as murdering her husband for a mere $500,000. Maybe both are true. We’ll see what the court decides.  


Paul Deloughery is an estate and probate litigation, and law insurance dispute consultant in Scottsdale, Arizona. For more information about his advice to maintain a family’s wealth, visit his website or check out his Twitter!