Life insurance benefit battle ends with inheritors in debt

by Leo Almazora11 May 2018

A conflict between a deceased woman’s heirs and agencies that she named as beneficiaries of two life insurance policies has ended with her inheritors in the hole for tens of thousands of dollars.

Former Colorado resident Carol Colby, 86, had two clear wishes upon her death: she wanted to have all her debts taken care of, and she wanted to make sizeable donations to multiple emergency responder agencies. She named her granddaughter Kellie Johnson as an executor in her will, meaning she and her family inherited Colby’s house — and became responsible for around US$30,000 in debt.

“A creditor can put a claim against the estate,” Johnson told KOAA News. “That executor can be ordered by a court to liquidate their assets to satisfy that debt.”

Before her passing, Colby had also taken out two life insurance policies with about US$60,000 that would be split evenly among four emergency responder agencies: the Woodland Park Police; Teller County Search and Rescue; the Teller County Fire Department; and Woodland Park Ambulance Service, renamed as Ute Pass Regional Ambulance District.

Upon discovering the existence of the two insurance policies, Johnson contacted each agency to request that they decline the money so that it could go toward settling Colby’s outstanding obligations.

“I told each one of them … would you please respectfully decline the money so that we could pay her debts, pay her bills, and save her house so it's not having to be sold to pay the bills,” Johnson said, acknowledging that none of the agencies are legally obligated to do so. She also said that she offered to donate the money left over after the debts were paid.

The Teller County Fire Department agreed to Johnson’s request. But Teller County Search and Rescue President Jake Slaughter refused, saying the money will greatly benefit the organization.

“[I]t was specifically set aside for us to use,” he said. “Yes, she doesn't want to sell the house and you know what, she doesn't have to sell the house. She can take out a mortgage.”

At an April 19 meeting, Woodland Park City Council members voted to retain their share of the insurance money. Soon after, Johnson learned from the Ute Pass Regional Ambulance District that the board had decided to keep its portion as well.

“Everything in this house will have to be sold piece by piece until the debts can be satisfied," Johnson said.

 

Related stories:
When a rule of thumb for life insurance doesn't apply
When selling life insurance to a client's parents makes sense

 

COMMENTS