If Michelle predeceases Danny, and Danny did not have a chance to modify his beneficiary designation, how will Danny’s death benefit be paid out?

Danny purchases a $1,000,000 whole life insurance policy. He names his three daughters, Donna-Joe, Stephanie, and Michelle, as revocable beneficiaries with each receiving one-third of the death benefit.

If Michelle predeceases Danny, and Danny did not have a chance to modify his beneficiary designation, how will Danny’s death benefit be paid out?
A . Donna-Joe and Stephanie will each receive $500,000.
B . Donna-Joe and Stephanie will each receive $333,333 and Michelle’s estate will receive $333,333.
C . Donna-Joe and Stephanie will each receive $333,333 and Danny’s estate will receive $333,333.
D . Danny’s estate will receive the entire $1,000,000 death benefit.

View Answer

Answer: A

Explanation:

When a beneficiary predeceases the policyholder and no alternate or contingent beneficiary has been named, the portion allocated to the deceased beneficiary is typically redistributed among the surviving beneficiaries. Since Michelle was named as a revocable beneficiary and predeceased Danny, her one-third share will be divided equally between the remaining two beneficiaries, Donna-Joe and Stephanie.

Thus, Donna-Joe and Stephanie will each receive half of the total death benefit ($500,000 each), as per LLQP guidelines which state that a predeceased beneficiary’s share is typically redistributed among surviving beneficiaries unless otherwise specified.