Dear Len & Rosie, My father just passed away in May, after my mother’s death in January. He was 82 and was not in good health, especially after my mother’s death.

He had a $45,000 life insurance policy. When we were getting his affairs in order after his passing, we sent in the information to the insurance company to claim his life insurance. We found out that my father had cashed out the policy for only $12,000. We cannot believe this.

There are five children. We think our father was taken advantage of due to his age, health and state of mind due to the passing of his wife. He had suffered a type of stroke that sometimes made him frustrated and frequently he could not remember what he was trying to say.

We do not believe he cashed out the policy of his own accord.

Is there a way to go back to the insurance company and argue that my father was not really capable of making this decision? Who would cash out a $45,000 insurance policy for only $12,000?

Kathleen

Dear Kathleen,

It’s more likely than not that your father’s $45,000 life insurance policy had a cash surrender value of only $12,000, which is why he received only that much when he turned his policy back in to the insurer.

Whole life insurance policies are considered as part insurance (the $45,000 face value), and part investment (the $12,000 cash surrender value). The cash surrender value increases over time and eventually can exceed the face value of the policy.

Unless the insurance company has a tape recording of its conversation with your father when he called to cash in his policy, we may never know why he did it.

It is extremely unlikely that the insurance company called him up and asked him to cash it in. And, as a rule, cashing in a life insurance policy is almost never a good idea, because you can sell a policy to investors even if you are unwilling or unable to pay the policy premiums.

What probably happened was that your father decided that he had bought this insurance to take care of your mother, and that he didn’t need to be paying additional policy premiums because she passed away before him. The insurer isn’t going to accept your explanation of your father’s mistake at face value.

If your father were in a conservatorship at the time he canceled the policy, then his action was and is legally void. Because he was not in a conservatorship, his action is legally voidable. However, to void the transaction, you would have to petition the court and prove that your father was incapable of making his own decisions and protecting himself from undue influence.

This will be difficult to prove, especially if your father was living independently, driving, paying his own bills, more or less on time, and otherwise getting through the day on his own.

Len & Rosie

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, 996-4505 or at www.lentillem.com. Len also answers legal questions each weekday, noon to 12:45 p.m., and Sundays, 4-7 p.m., on KGO Radio 810 AM.