Life Insurance Contracts Assignment Quiz

Study Notes

Assignment of Life Insurance Contracts

Absolute Assignment: Total transfer of all policy rights from the assignor to the assignee through a sale or gift.
Partial Assignment: Transfer involving less than all rights of the assignor.
Collateral Assignment: Partial transfer of property owner's interests to secure a loan.
Gift: Transfer of property without any expectation of reciprocal consideration.
Incidents of Ownership: Ownership rights in a policy during the past three years affect inclusion of death proceeds in the insured's estate for federal tax purposes.
Beneficiary Designation: Revocable designation allows policy owners to assign the policy without beneficiary consent, while irrevocable designations require consent for assignments.
Defeasible Vested Interest: A beneficiary holds a vested interest that may be extinguished by actions of the policyowner.
Beneficiary Rights and Assignments: Death proceeds divided based on collateral assignments and beneficiary designations; irrevocable designations cannot be assigned without consent.
Assignment by Beneficiary: Beneficiaries can assign their rights before or after the policy matures unless stated otherwise.
Spendthrift Clause: Prevents beneficiaries from transferring their interest in the insurance proceeds, protecting them from creditors.
Effect of Assignment on Beneficiary's Rights: Distinction between absolute and collateral assignments impacts the rights transferred; absolute assignments divest ownership fully, while collateral ones only transfer necessary rights for loan security.
Ownership Rights Before Death: Include policy control, beneficiary designation, loans against cash value, and more; all rights belong to the owner without needing beneficiary consent.
Ownership Rights After Death: Beneficiaries are entitled to proceed disbursement, settlement option elections, and other post-death rights.
Parties Involved in Life Insurance: Include the applicant, insured, policy owner, beneficiary, and assignee.
ABA Assignment Form: Provides options for assignees in managing policy proceeds and their rights after the policy owner's death.
Ownership Endorsement: A formal written instrument is necessary to transfer full legal ownership of a policy.
Insurable Interest: Required from the applicant at the contract's inception; asssignee need not have insurable interest unless induced to procure the policy.
Court Involvement: Bill of Interpleader allows courts to determine conflicting claims for policy proceeds.
Multiple Assignees: English rule grants priority based on notice given, while American rule prioritizes the sequence of assignments.
Company's Responsibility: Insurance companies are not liable for the validity of assignments; payments made without notice void liability.
Resulting Trustee Concept: Assignees requesting more than their interest become resulting trustees for the excess proceeds, accountable to the rightful owner or beneficiary.

Description

Test your understanding of life insurance contract assignments, including absolute, partial, and collateral assignments. This quiz covers key concepts such as ownership rights, beneficiary designations, and the implications of these assignments on tax and estate planning.