What to do when a Lincoln Financial account holder dies

Because the IRS requires Lincoln to report and collect generation-skipping transfer (GST) tax on any life insurance death benefit of $250,000 or more that is paid to a trust. Section 5 of Lincoln's Certification of Trustee Powers (form CL11702) is a mandatory GST declaration with four options: the trust is not a GST trust (for example, the only beneficiaries are the insured's children); the trust is a GST trust but the payment is excluded under IRC 2611(b) or is otherwise not currently subject to GST tax (the typical ILIT outcome, where the insured held no incidents of ownership in the policy); the trust is a GST trust and you are attaching a Schedule R-1 to IRS Form 706 to allocate GST exemption to the policy; or the trust has an inclusion ratio of one, in which case Lincoln withholds GST tax at the rate required by law. Lincoln states outright that failing to submit the Schedule R-1 when one is required will delay payment of the death benefit. The trustee -- or an attorney representing the trust -- signs this declaration, and Lincoln relies on it for tax reporting, so have it reviewed before it is filed.

No, and this is the trap that catches people. Lincoln's Ownership Change for Life Policy (CS06891) changes only the OWNER of the policy. Its own instructions state that an ownership change does not automatically change existing beneficiary designations -- to redirect the proceeds to the trust you must also submit a Beneficiary Change for Life Policy (CS06893). File one without the other and the ILIT owns a policy whose death benefit still pays out to whoever was named years ago. Three other CS06891 details matter: if an assignee or irrevocable beneficiary already exists on the policy, that party must also sign the form; the trust's EIN is required and Lincoln may ask for an IRS Form W-9; and you should name who receives future premium notices, since by default they go to the new owner, the trustee. Separately, transferring an EXISTING policy into an ILIT starts a three-year lookback under IRC 2035 -- if the insured dies within three years, the death benefit is pulled back into the taxable estate anyway. Lincoln does not create ILITs; that is an estate attorney's job.

Naming a trust as an annuity beneficiary at Lincoln costs your spouse the single most valuable option on the contract. A surviving spouse who is the SOLE named beneficiary can elect "Assume Ownership" in Section 3 of the Claimant's Statement, taking over the contract and continuing its tax deferral -- on a qualified contract or IRA, deferring until age 73 (the election must be made by the later of the end of the calendar year you reach 73, or the end of the calendar year following the owner's death). Assuming ownership keeps the original contract terms, though some optional riders may terminate. If a TRUST is the beneficiary instead, Lincoln limits the payout menu to just three choices: a lump sum, a 5-year deferral, or continuation of i4LIFE Advantage on a nonqualified contract where i4LIFE was already running. There is no spousal assumption and no life-expectancy stretch. An estate named as beneficiary gets the same three narrow options, and the estate must be kept open for the full five years to use the deferral. Trusts are usually the wrong annuity beneficiary unless the trust exists for a specific reason -- a minor child, a beneficiary with special needs, or creditor protection.

Lincoln sets its document requirements by dollar threshold. For a LIFE insurance claim of $500,000 or less, plain copies of the death certificate and all other required documents are acceptable. Above $500,000, a certified copy of the death certificate is required. For an ANNUITY claim, copies are acceptable at $100,000 or less. A death certificate in a foreign language must be translated into English, and a death outside the United States also requires the Foreign Death Questionnaire (CL10392) plus a Report of Death of an American Citizen Abroad from the U.S. Embassy. A few Lincoln-specific rules trip people up: it will not accept a driver's license as proof of a beneficiary name change (bring the marriage certificate or divorce decree); a Power of Attorney signing on a beneficiary's behalf must be no more than three years old, or a Power of Attorney Affidavit confirming it has not been revoked is required; and if the estate is the beneficiary, the estate's own TIN is required -- the decedent's Social Security number cannot be used -- though Lincoln will accept a qualifying state small estate affidavit in place of Letters Testamentary.

Employer-sponsored GROUP life and AD&D coverage is not handled by Lincoln's individual claims line at all. Lincoln directs survivors to contact the policyholder's EMPLOYER for filing instructions; general group claim support is 800-423-2765 (Mon-Thu 8:00am-8:00pm ET, Fri 8:00am-6:00pm ET), with claims sent to 8801 Indian Hills Drive, Omaha, NE 68114. Because a group certificate is owned by the employer plan rather than by the employee, it also cannot be assigned to an irrevocable life insurance trust the way an individual policy can -- a trust can only be named as beneficiary. On the Liberty question: Lincoln acquired Liberty Life Assurance Company of Boston from Liberty Mutual in 2018, but it kept only Liberty's GROUP BENEFITS business. Liberty's individual life and annuity block was reinsured to Protective Life Insurance Company, so a survivor holding an old individual Liberty Life policy is generally a Protective claimant, not a Lincoln one. Lincoln does still administer several other legacy blocks under its trust-certification form CL11702 -- policies originally issued by Aetna Life, Cigna Life, Connecticut General Life, First Penn-Pacific, and Voya Retirement Insurance and Annuity.