Question

6 austin owns a policy on the life of his wife anna. austin has not named a beneficiary because he thinks that if anna predeceases him, he will receive the death benefit (as the policy owner), or his estate will receive the death benefit if he dies before anna. when anna dies suddenly, her creditors make a claim on the death benefit of the policy. which of these statements is true? a. as no beneficiary has been named, the proceeds will be paid to austin’s estate and are protected from anna’s creditors. b. as the policy owner, austin does not meet the statutory definition of a beneficiary. the proceeds are not protected from anna’s creditors. c. the death benefit of a life insurance policy is always creditor protected. d. as anna’s spouse, austin qualifies as a preferred beneficiary.

Explanation:

• Option a: If no beneficiary is named, the proceeds go to the policy owner (Austin) or his estate, but here Anna died, so the policy owner (Austin) is the recipient? Wait, no—wait, the policy is on Anna's life, Austin is the owner. If no beneficiary, when Anna dies, the death benefit goes to the policy owner (Austin) or his estate? Wait, no, the policy is on Anna's life, so the death benefit is paid to the beneficiary or, if none, to the policy owner (Austin) or his estate? Wait, but Anna's creditors are making a claim. Let's analyze each option:
• Option a: Says proceeds to Austin's estate and protected from Anna's creditors. But if Austin is the policy owner and no beneficiary, when Anna dies, the death benefit goes to Austin (the policy owner) or his estate? Wait, no—wait, the policy is on Anna's life, so the insured is Anna, owner is Austin. If no beneficiary is named, the death benefit is paid to the policy owner (Austin) or his estate? Wait, no, the policy owner is Austin, but the insured is Anna. When the insured (Anna) dies, the death benefit is paid to the beneficiary, or if none, to the policy owner (Austin) or his estate? Wait, maybe I got that wrong. Let's check the options again.
• Option b: As policy owner, Austin is not a beneficiary (statutory definition), so proceeds not protected from Anna's creditors. Let's recall: In some jurisdictions, the policy owner is not considered a beneficiary in the statutory sense, and if there's no named beneficiary, the proceeds go to the policy owner, but if the insured's creditors are making a claim, are they protected? Wait, the key is: If the policy owner is not a beneficiary (statutory), then the proceeds are not creditor - protected for the insured's creditors? Wait, no—wait, the death benefit is for the beneficiary. If there's no beneficiary, it goes to the policy owner. But if the insured (Anna) has creditors, do they have a claim? Let's think about the options:
• Option c: "Always" creditor - protected is wrong, because there are cases where it's not.
• Option d: Being a spouse doesn't necessarily make one a preferred beneficiary in this context, and this doesn't address the creditor issue.
• Now, option b: The policy owner (Austin) doesn't meet the statutory definition of a beneficiary. So the proceeds (death benefit) are not protected from Anna's creditors. Let's verify: If there's no named beneficiary, the death benefit is paid to the policy owner (Austin). But since Austin is not a beneficiary (statutory), the proceeds are not protected from the insured's (Anna's) creditors. So Anna's creditors can claim the proceeds. So option b is correct.

Answer:

b. As the policy owner, Austin does not meet the statutory definition of a beneficiary. The proceeds are not protected from Anna's creditors.