Can I loan someone money and tie up their life insurance as collateral? 5 Answers as of August 05, 2011

If I loan my son-in-law money and he agrees to make me a beneficiary on his life insurance, is there a way to ensure he can't change the beneficiary later?

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Burnham & Associates
Burnham & Associates | Stephanie K. Burnham
Yes and No. Unless the insurance company is willing to get involved in ensuring that the Owner of the policy does not change the beneficiary you will not be able to prevent the Owner of the policy from making a different person the beneficiary. However, you and the Owner can enter into a contract to prevent this from being the case, using the Insurance Policy as collateral and in the event the Owner does change the beneficiary, use the contract to challenge the beneficiary from receiving all of the proceeds. It is a tough situation and you should speak with an attorney to assist you in this matter.
Answer Applies to: New Hampshire
Replied: 8/5/2011
The Coyle Law Office
The Coyle Law Office | T. Andrew Coyle
This is possible if the policy allows him to name an irrevocable beneficiary. If so, you would both need to consent to any change in the beneficiary form. If the policy does not allow for that, then there would be no way of ensuring he doesn't change beneficiaries unless he can transfer the policy so that you are the policy owner.
Answer Applies to: Illinois
Replied: 8/3/2011
Apple Law Firm PLLC
Apple Law Firm PLLC | David Goldman
Yes, but you would probably have to transfer the ownership of his policy into your name until the debt was paid off.
Answer Applies to: Florida
Replied: 8/3/2011
Ashman Law Office
Ashman Law Office | Glen Edward Ashman
It is risky to assume that will work. What happens when he simply stops paying on the policy, or goes bankrupt and wipes out your debt? It is always a horrible idea for people to loan money. If you are bound and determined to do so, see a lawyer to draft proper documents. You still could lose but your odds improve.
Answer Applies to: Georgia
Replied: 8/3/2011
The Schreiber Law Firm
The Schreiber Law Firm | Jeffrey D. Schreiber
No. But you can take a security interest in it by having him sign a note pledging the policy, have him sign an assignment and send it to the insurance company (they would usually have their own form) and take possession of the policy.
Answer Applies to: California
Replied: 8/3/2011
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