Question

Nellie purchased a life insurance policy on her son Adam's life for a face amount of $300,000. She named her husband Danny, Adam's father, as the successor policyholder. She named Adam's sister, Sally as the beneficiary of the policy. When Adam reached the age of majority, Nellie made an absolute assignment of the policy to him. Adam did nothing about the policy and died a few months later in a boating accident. Who received the benefit of the policy?

a. Nellie, the former owner
b. Danny, the former successor policyholder
c. Sally, the former beneficiary
d. Adam's estate

Answer 1

Option (c), Sally, the former beneficiary, received the benefit of the life insurance policy after Adam's death, as she remained the named beneficiary following the absolute assignment of the policy to Adam.

Step-by-step explanation:

Upon Adam's death, the benefit of the policy is paid out to the named beneficiary at the time of his passing. Since Nellie made an absolute assignment of the policy to Adam when he reached the age of majority, he became the owner of the policy.

Given that Adam did not change the beneficiary after the policy was assigned to him, the beneficiary designation remained the same. Therefore, the person who received the benefit of the policy would be Sally, the former beneficiary, as she was the named beneficiary at the time of Adam's death.