Life insurance is commonly used in estate planning to provide cash to pay estate taxes as well as the day to day bills of surviving family members. But the story of Germaine "Suzy" Tomlinson takes the concept way beyond its outer boundaries.
Ms. Tomlinson, a 74-year old Indianapolis woman, died in September 2008, the apparent victim of an accidental drowning in her own bathtub. Not an unusual story in and of itself until it was discovered three months after Ms. Tomlinson's death that a young friend and business associate of hers, 36-year old JB Carlson, who also happens to be the last person to have seen Ms. Tomlinson alive, had taken out a $15 million insurance policy on her life. The insurer, AIG, has refused to pay the owner and beneficiary of the policy, Carlson's company aptly named Carlson Media Group, because it claims that Mr. Carlson lacked a legitimate insurable interest on Ms. Tomlinson's life and therefore the policy was a fraudulently obtained "stranger-originated policy." Mr. Carlson denies the allegations, stating that the policy was traditional "key man insurance" purchased by Carlson Media Group in 2006 because Ms. Tomlinson was on the board of the company. Yet court documents filed in the civil lawsuit brought by AIG against Carlson have revealed that while Ms. Tomlinson listed her net worth as $46.7 million on the insurance application, her annual income for the year in question was a mere $17,000.
Certainly this is a messy case for AIG, which did after all issue the policy and accept $387,000 in annual premiums. This leads to another twist in the story - it seems that the money to pay the premiums was borrowed and prior to Ms. Tomlinson's death Mr. Carlson attempted to refinance the loan but failed, which meant that the policy would have reverted back to the lender on October 1, 2008, a mere four days after Ms. Tomlinson's death.
While the Indianapolis police initially investigated Ms. Tomlinson's death as a homicide, after several months they concluded that her death was accidental. And apparently Mr. Carlson did manage to get the loan for the premiums refinanced in mid-October since the policy suddenly became a valuable $15 million asset of his company. But to date AIG has refused to pay one penny pending the outcome of the lawsuit, and from the looks of things Mr. Carlson won't be receiving the insurance proceeds any time soon.
And of course, if Ms. Tomlinson was really worth $46.7 million at the time of her death, then her estate would owe a hefty federal estate tax bill since the estate tax exemption in 2008 was only $2 million, but there has been no mention of any cash from the policy being needed to pay the IRS. This seems to be yet another example of financial elder abuse, although taken to the extreme level.
- Life, Death and Insurance: Indiana's $15 Million Mystery
- Needs and Uses of Life Insurance in Estate Planning
- Overview of Current Federal Estate Tax Laws
- Financial Elder Abuse - Exploitation Through Estate Planning
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- Financial Elder Abuse Goes to Hollywood