My sister has power of attorney over my father. She changed his life insurance policy to not only to be the owner of the policy but also changed my mother from being beneficary to herself. Is this legal?

3 answers | Last updated: Sep 20, 2016
A fellow caregiver asked...

My sister obtained durable power of attorney. In order to get Medical/Medicaid my sister gifted out $55,000 to five people, four of which were her immediate family and then put the money into an account for my fathers care. There was a loan on the $75,000 life insurance policy of $35,000 of which she paid off with the $55,000. My sister changed herself to the owner and the beneificary of the life insurance policy. My father has now died and she she isn't sharing any money and is planning a kitchen remodel. My mother was the beneifcary until my sister changed it. It was a policy purchased in 1966 and my mother was the beneificary all this time.


Expert Answers

Judy and Fred co-mediate family property and financial conflicts, and each work individually as mediators as well. Judy Barber, a mediator and family business consultant, assists clients in resolving overlapping family and money conflicts so they are better able to make sound estate planning decisions. Frederick Hertz is an attorney and mediator who specializes in resolving co-ownership matters involving families, siblings, spouses, cohabitants and domestic partners.

Your question raises issues that frequently arise in families. It appears that your father appointed your sister as his power of attorney "“ though interestingly, you speak of it as her having "obtained" that right. From a technical legal matter, however, it was something he did "“ and therein lies the legal answer to your question. If he was competent and had the legal capacity to make that decision, then his decision will be binding on the rest of you. However, if he was not legally competent at the time, then your sister was not acting within her legal rights.

Unfortunately, proving that your father was not legally competent will not be easy or cheap. It would require getting medical records from the time that he signed the document, and then interviewing witnesses who could testify as to his mental condition at the time. As you can imagine, this could easily be very expensive "“ and it would probably generate a lot of family hostility.

A related issue is what your sister did with the money. You say that she "gifted out" money to qualify your dad for Medicaid "“ and we're assuming it was his money that she gifted out. But if she and her family then used the money to care for your dad and then used the other money to pay off the insurance policy loan, then the others will argue that she didn't misuse his funds. Moreover, if this strategy resulted in his getting Medicaid benefits that otherwise would have depleted his savings, then they also will claim that her actions didn't really harm him.

For all these reasons, we are concerned that legal action to undo what has happened probably won't be successful. Even more distressing, given the amounts at stake it probably would not be financially prudent either.

But as we know, the legal issues are not the only concerns: it is also about fairness. You believe your sister took advantage of her role as durable power of attorney by removing your mother's name from the insurance policy and replacing it with her own. The change could be perceived as unethical and self-serving.

For the sake of family relationships and most important your own peace of mind, we hope you have a conversation with your sister. Share your concerns about the way she handled your father's affairs, but be prepared for the possibility that she may be defensive and angry that you question her decisions. It is important for you to understand what motivated her to change the beneficiary on your father's insurance policy. Let her know that it is confusing that she kept the remaining funds of your father, including the pay-out of the life insurance, rather than distribute the money equally among family members. At the same time, give your sister the opportunity to talk about her perspective. Often family caregivers feel alone with the responsibility of a dying parent, and although it doesn't make sense to you, your sister may feel entitled to what she's taken.

It probably is best that you not talk with your sister unless you have a neutral, third party present at for the conversation, such as a mediator. Most counties throughout the country have low fee community mediation services that help family members resolve conflicts. The environment supports respectful communications and constructive candor that will hopefully enable you and your sister to work things out in a way that meets both your needs.


Community Answers

A fellow caregiver answered...

My sister whom I loved dearly upped and moved away right after I got married. She is married to an awful person. She would not speak to me and would let her husband get on the phone and call me the most God Awful names. Then suddenly I had a dream that her and her husband stole my fathers life insurance policy I woke up and and said to myself "No" all of this pain could not of been about money and my sister whom I loved would not of sold me out for money well it turned out I did find an old Union contract stating that my father did have an active life insurance policy. I am still trying to find out with what life insurance company. I do have the contract a proof but now need the proof of who stole this. I am almost 100 percent postive it was indeed my sister and her husband and the sad thing is I saw a quote from her on Pin Interest that said " Treating people Nicely is a wonderful legacy to leave behind" the sad thing is she did not treat me nicely or other people yet maybe she things only she needs to be treated nicely. She and her husband caused me pain for years and over money I would of never thought if this dream did not come to me. I hope that someone can help me find this life insurance company so I can find the proof I need. Thank You. To my sister .... if you read this and you know what you did. Treating people nicely does not include stealing and treating your little sister like she is dead. A horrible sin that you should consider all the pain that you and your terrible husband caused me over the years. To think I thought you truly loved me what a big mistake I made with you. You have lost my respect for a little bit of cash sad and shame on you.


Clara1950 answered...

It's sad that so many people are like this these days but it happens a lot. My sister had Power Of Attorney and was executor because she lived close to our mother. I live 1000 miles away and my husband was battling cancer when my mother died so I wasn't able to go home. My mother had two life insurance policies and a home. I got nothing even though my mother had told me how it was split equally before the Alzhiemer's destroyed her mind. The worst part though was that she was cremated instead of being buried next to my father per her request in a prepaid grave. I didn't fight it because it's not worth it. Yes I could have used the money, cancer isn't cheap but in the end we can't take it with us when days on this earth are over and I refuse to stoop to her level by fighting over things and money. I haven't spoken to her since this happened and I never will again. Yes she is my sister but if she had any love or compassion in her, she wouldn't have done what she did. I can forgive her taking the money from me but I can't forget my mothers last wish.