Heirs Fight for $56 Million in Life Insurance Proceeds

Arthur Kramer, New York attorney, took out seven life insurance policies worth $56.2 million in his final years. Kramer quickly sold the right to claim the benefits to investors rather than leave the proceeds to his family members.

Kramer’s widow, Alice, refused to give the death certificate to the investors and soon after filed a lawsuit. She alleged that the deals her husband entered into with the investors skirted New York’s insurable interest law, and that the $56 million should go to Kramer’s estate.

Kramer originally had the proceeds payable to family trusts with three of his children as trust beneficiaries. Kramer then directed the children to assign their trust interests to investors. Neither Kramer nor his children ever paid the premiums. Friends of Kramer say that he loved shrewd and complex maneuvers such as this one.

The remedy in many states for policies wrongly taken out is to void the policy and return the premiums. But New York’s law allows the estate to sue for the insurance proceeds.

Lawyers battling the Kramers say the family probably won’t collect $56 million, but a New York Court of Appeals ruling in their favor could give them the leverage they need for a large settlement with the investors. Such a ruling would also question the status of hundreds of investor-owned life insurance policies in New York.

For more details, see Mark Maremont and Leslie Scism, Lawyer’s Heirs Fight Insurers in $56 Million Policy Intrigue, W.S.J., June 11, 2010.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) and Jim Hillhouse (WealthCounsel) for bringing this to my attention.