Q

What is the slayer rule?

A

The slayer rule or slayer statute prevents someone from inheriting from your estate, including any life insurance payout, if they planned to murder you.

Life insurance policies have been a plot point in countless thrillers and true crime shows. We’ve all seen the classic whodunnit with a $1 million life insurance payout as the motive and the beneficiary as the prime suspect.

But, real life isn’t a true crime show. Slayer rules, also known as slayer statutes, keep anyone from benefiting from your life insurance policy if they’re even suspected of murdering or plotting to murder you. Here’s how the slayer rule works and when it does make sense for someone to own life insurance coverage on you.

Key Takeaways

  • Even the suspicion of murder can disqualify your beneficiary from receiving life insurance proceeds or any other part of your estate

  • The slayer rule applies even if there's no convinction

  • Each state has its own version of a slayer statute

  • If your beneficiary can’t receive the death benefit, it’s paid to your other beneficiaries or your estate

What is the slayer rule?

Slayer statutes prohibit anyone from inheriting from the estate of someone they murdered (or conspired to murder), including that person’s life insurance payout. If your beneficiary can’t receive the death benefit because they planned to kill you, the insurance proceeds go to your other primary beneficiaries or contingent beneficiaries.

A conviction isn’t necessary for the slayer rule to apply.  Insurers can refuse to pay the death benefit as long as there is a preponderance of evidence that the beneficiary committed the crime. [86] Even if they’re acquitted in the trial, they can still be barred from getting the life insurance money.

The specifics of slayer statutes differ depending on your state’s laws. For example, in some states insurers can also deny the death benefit if there is a suspicion that a beneficiary “financially exploited” the policyholder or abused them. [87]  

When can someone take a life insurance policy out on you?

If someone wants to take a life insurance policy out on you, there isn’t an immediate cause for alarm. Hopefully, incorporating a life insurance policy into your financial strategy is a conversation you’ve already had.

It’s common to own a policy on someone if their death would have negative financial consequences for you. Here are some situations when the need might arise:

  • Business partnerships: If you own a business with someone, your death would affect the company. Partners often buy key person insurance on each other to cover potential business losses or the cost of hiring a replacement.

  • Co-signed loans: Life insurance protects parents or a spouse who co-signed your private student loans or a mortgage from becoming liable for the payments if you die before paying them off.

  • Caring for loved ones: If you help care for family members, like elderly parents, a policy allows a sibling who shares that responsibility to replace your financial support or pay for new at-home care.

  • Supporting your partner: Couples that share finances should have life insurance to protect each other from the unexpected loss of income or household support if one of you dies. 

In each situation above, you could own your own policy and name your business partner or family member as a beneficiary, but it’s not uncommon for these individuals to own a policy on you instead. 

Life insurance companies protect you from being insured without your knowledge by requiring you to sign the policy and go through underwriting. No one can take a policy out on you without your consent without committing life insurance fraud

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What happens if one beneficiary can’t receive the death benefit?

Whether a beneficiary can’t accept the life insurance proceeds because of the slayer rule or for a more benign reason, the death benefit will pass to your other beneficiaries or your estate.

Setting up multiple primary beneficiaries is easy as listing them in your policy and noting what percent of the death benefit each person gets. If one can’t accept the benefit, that portion is usually split equally among the remaining beneficiaries and so on, until only one person remains. 

You can also set up contingent beneficiaries, who receive the death benefit if none of your primary beneficiaries can accept it. If both your primary and contingent beneficiaries can’t accept the payout, it goes to your estate and a court decides who receives the funds.

To make sure that your family is adequately protected, some people set up a per stirpes vs. per capita death benefit, which protects your beneficiaries’ heirs if the beneficiary cannot accept the death benefit.

When should you update your life insurance beneficiaries?

You can update your beneficiaries at any time, and except in rare circumstances, the policy owner is the only person who can change your beneficiaries. It’s a good idea to sit down every year or two and make sure your policy matches your current needs.

You should also review your policy with every big life change, such as getting married, having kids, going through divorce, or if a beneficiary predeceases you. It’s as simple as updating your beneficiary designation in your online portal or calling your insurer.

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Hollywood thrillers might make you feel like buying a life insurance policy puts a target on your back. But for most families, it’s a critical piece of financial protection for the people that you love and trust.

Slayer rule FAQ:

How does the slayer rule work?

Also known as the slayer statute, this rule prohibits your beneficiary from getting the death benefit if they are suspected of murdering (or trying to murder) you.

What happens if the slayer statute is enacted?

If your beneficiary kills you, the life insurance payout goes to your other primary beneficiaries, your contingent beneficiaries, or your estate.

Where do slayer rules apply?

Each U.S. state has its own slayer statute. Some are broad and permit insanity pleas, while others are more intricate and won’t pay out if there are signs of past abuse.