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How do I resolve a conflict over my mother-in-law’s life-insurance policy?

The question

My husband is in a situation that doesn't seem to have a clear answer, never mind a good answer. Here's the situation: My mother-in-law passed away recently. She'd been divorced from her husband for approximately 20 years. As part of their divorce negotiations, they agreed that they would each have a life-insurance policy with each other named as the beneficiary and my father-in-law would pay the premiums for both policies. But about 15 years ago, my mother-in-law changed the beneficiary on her policy from her ex-husband to their children. We've just received a cheque for my husband's portion of the policy. My father-in-law wants his children to return the money to him as he feels he is the rightful beneficiary. While my husband's share of the policy is not huge, we are the parents of a young child and I have returned to school as well, so even a few thousand dollars could be very helpful. My father-in-law is retired with few expenses and a very good pension. He's said many times that he's financially comfortable. Do we keep the money or return it to him? We're not particularly close to him but don't want to lose a relationship with him either. My husband is a good man and is having trouble choosing between providing a financial boost to his young family and loyalty to his dad. Is there some way to have both?

The answer

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I'm not sure if this is a good answer, but I'll try to make it a clear answer: Keep the money.

Partly because, as you mention, you need it and your father-in-law doesn't.

(Though that has a whiff of Marxism to it, i.e., to each according to his needs, from each according to his means. Whereas we live in a capitalist society, i.e., to each according to his greed, from each according to his spleen.)

Distribution of wealth/allocation of funds in families is always tricky. Example: My sister is rich (her husband inherited a pantload of dough when his mother died) and I'm most emphatically not. When it comes time for my parents to bequeath the few thousand they have in their bank accounts, will they take that into (my bank) account?

I wish! But probably not … But your case is even more straightforward, because your mother-in-law clearly wanted you and your husband to have the money. You talk about your husband's loyalty to his father. What about your father-in-law's loyalty to his son and grandson?

Moreover, why didn't he bring all this up 15 years ago, when it first happened?

Now, true, the clarity of the issue is muddied a bit by the fact that he paid the premiums all those years.

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But not much: In my mind, when a couple gets married, they are throwing in their lot together financially, as well as in every other way: pushing both their stacks of chips into a common kitty, to use a poker analogy.

So let's say (I'm just guessing here) that throughout their marriage your father-in-law was the breadwinner and your mother-in-law stayed home with the kids. The idea is whatever money flowed into the household was shared by them both.

If you have kids, this continues to be true even after a couple splits up. The law recognizes that, which is why there are such things as alimony and child support.

So even though your father-in-law paid for her insurance policy, your mother-in-law is (or was: my condolences) well within her rights to name anyone she pleases as a beneficiary.

And she named your husband.

Of course, more will be required, in terms of tact and diplomacy, than a simple "no" when he asks for the money. People hate being refused money they believe is owed to them (why I never lend money, I'd rather just give it to someone: Being owed gnaws at my innards.)

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The good news is: It's your husband who has to deal with this – though of course you should prop him up, support him and egg him on. He should tell his father, in the gentlest way possible, that he wants to keep the money because a) the two of you need it; b) his ex-wife clearly wanted you to have it; and so forth.

If your father-in-law counters by saying, "I paid for it, therefore I'm entitled to it," use some version of my poker chips analogy (above).

Don't scruple to reference your young family and how you could really use the money for (say) violin lessons. It's your father-in-law's grandchild we're talking about here, after all.

He might squawk. He might grumble and mutter into his mustache for a while. But I think he'd have to have a heart of stone if he didn't ultimately shrug and say you could keep those few thousand dollars.

Are you in a sticky situation? Send your dilemmas to damage@globeandmail.com. Please keep your submissions to 150 words and include a daytime contact number so we can follow up with any queries

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