Final answer:
A revocable beneficiary designation allows the policyowner to change the beneficiary at any time without consent. This flexibility provides control over the policy but can lead to complications as seen in the case between Sharon Kowalski and Karen Thompson.
Step-by-step explanation:
The arrangement that gives a policyowner the right to change the beneficiary is known as a revocable beneficiary designation. This means the policyowner maintains control over the beneficiary designation and may change it at any time without the consent of the beneficiary. In contrast, an irrevocable beneficiary designation means the beneficiary has a vested interest in the policy, and the policyowner cannot change the beneficiary without the beneficiary's consent.
In the case of Sharon Kowalski and Karen Thompson, they named each other as policy beneficiaries to show their commitment to one another. Unfortunately, due to Kowalski's incapacitation and the lack of recognition of their relationship, Thompson faced legal challenges in asserting her rights, highlighting the importance of understanding beneficiary designations and legal guardianship.