Can a Beneficiary Say No to the Money? (Yes-Here's What Happens Next)

Picture this: You’ve done the responsible thing. You got a life insurance policy. You picked someone you trusted at the time as your beneficiary. But years go by, life shifts, and suddenly… that person feels more like a stranger than someone you'd want managing thousands of dollars in your absence.

I recently came across a Reddit post where someone asked, “I’m not close with my beneficiary anymore—should I change it? What if they just refused the money?”

Now, most people would assume that no one in their right mind would turn down a life insurance payout.

But believe it or not—yes, a beneficiary can refuse the money.

And when they do, it sets off a very specific process.

So, What Happens When a Beneficiary Refuses the Money?

When a life insurance beneficiary chooses to decline the death benefit, it's called a disclaimer of interest. To do this legally, the beneficiary must submit a written refusal—usually by completing a Qualified Disclaimer Form.

This form must meet IRS and insurer requirements and typically includes:

✅ A clear statement that the person is refusing the benefit

✅ The beneficiary’s signature

✅ A declaration that the decision is being made voluntarily and without compensation

Once that disclaimer is accepted by the insurance company, they don’t just pocket the money. The payout goes to the next eligible person—either:

• A contingent beneficiary, if one was listed

• Or,  it’s distributed based on the state’s intestate succession laws (i.e., next of kin—spouse, children, parents, siblings, etc.),

• Or the benefit flows to the insured’s estate

  
  

Now Here’s Where It Gets Messy…

If the person you thought would handle things refuses the money, and you didn’t name a backup (contingent beneficiary), it can delay the payout by months.

This is one of the biggest reasons I tell my clients:

👉🏽 Review your policy annually.

👉🏽 Update your beneficiaries when your relationships change.

👉🏽 Don’t assume someone wants the responsibility that comes with that money.

Because life happens. People grow apart. And not everyone wants to be in charge of final expenses, lump sums, or family drama.

Don’t Let Old Decisions Create New Problems

Naming a beneficiary isn’t a “set it and forget it” kind of thing. If you wouldn’t call them to pick your kids up from school or to help you in an emergency… you probably shouldn’t leave them in charge of your legacy either.

So go ahead—log into your portal. Review that policy. Check that name. Ask yourself, “Would this person answer the call when my family needs them most?”

And if not? It’s time to make a change.

Your legacy deserves better than a maybe. It deserves a plan.

✨ Refusing the money? Is Crazy. But the real trouble starts with the 5-mistakes I saw people make everyday. You'll find them all in my free checklist. [Download the Life Insurance Essentials Checklist HERE.]

Turning uncertainty into clarity—one step at a time! 🔑