My condolences to you on your loss. If your daughter named her sister as the beneficiary under her life insurance and her sister survived her, then no, her husband cannot do anything to have those assets pass back to your daughter's probate estate or anyone else. Her sister, if willing, can disclaim the assets (assuming that it hasn't been more than 9 months since your daughter's passing), but if the sister has any tax liens or is eligible for Medicaid benefits due to a disabling condition, that may not fix the problem, or it may create problems for the sister. In addition, if the sister is willing to disclaim, the policy will need to be carefully reviewed first to determine what happens to the disclaimed proceeds. They may still not pass to your daughter's estate, or to her husband alone.
If the sister is not willing to disclaim the proceeds, or just make an outright gift of the proceeds, then they are hers and there's nothing your daughter's husband can do about that. This is why updating beneficiary designations after a marriage is critical.
If the sister may be willing to give up the assets, or at least a portion, then she AND your daughter's husband need to consult good lawyers, figure out the best possible way to proceed, and take the needed steps as soon as possible. A disclaimer must meet very strict requirements with regard to timing and other issues in order to be qualified and not result in the sister's making a taxable gift by giving up the proceeds. In addition, as discussed above, the result of a disclaimer may not be as desired, if the policy's terms don't result in the desired distribution. It's very complicated and it is not a do-it-yourself project.
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