A Trust Was Created Under Will as Beneficiary of Life Insurance Policy Without the Words “Trust” or “Trustee”

In the estate law and trust and estate litigation case of Estate of Thomas, PICS Case No. 14-1041(C.P. Philadelphia, May 12, 2014), the Honorable John W. Herron ruled that the insurance company erred in concluding that decedent’s will had not created a trust beneficiary to receive her life insurance proceeds. The court directed that the insurance proceeds be allocated to the trustee for distribution according to the will.

Elaine B. Thomas died testate in 2012. Her will appointed Ashley Super, her granddaughter, as executor “of her estate and insurance.” The will specifically referenced her life insurance. It outlined specific bequests to various relatives and friends and provided that the remainder of the insurance money was “to be split equally and put into separate trust accounts for” her son and Keenya Banks-Bryant, her daughter, and that each was to receive a lump sum payment of $10,000 and then monthly payments of $1,000 until the money was exhausted.

After Thomas’s death, Super contacted the Federal Employee Group Life Insurance Program to collect the benefits due. She received a letter from MetLife Insurance Co., which paid claims for OFEGLI, denying her request on the basis that Thomas had named as policy beneficiary the “trustee(s) or successor(s) as provided in last will” but that will did not name a trust or appoint a trustee and, therefore, the proceeds would be distributed to the deceased’s children. Super filed a petition seeking a determination that Thomas had created a trust in her will that qualifies as the beneficiary she had designated under her insurance policy.

The court said the polestar of any analysis of the decedent’s will was her intent. To discern that intent, a court had to be guided by the plain language of the document. The will had to be construed as a whole in the context of the surrounding circumstances. Case law established that the words “trustee” and “trust” were not essential for the creation of a trust by a will.

Further, 20 Pa.C.S. 7732 set forth five criteria for determining whether a trust had been created without requiring “trust” or “trustee”: the settlor had the capacity to created a trust; the settlor signed a writing that indicated an intention to create a trust and that contained the trust’s provisions; the trust had a definite beneficiary; the trustee had duties to perform; and the same person was not the sole trustee and sole beneficiary of the trust.

The court held that Thomas satisfied these criteria. Thomas had the capacity to make a will. She signed the will. Super had clearly been named executor “of my estate and insurance,” The court said that when that provision was read in the context of the will as a whole, it was clear that Super had been placed in trust of managing the policy proceeds with numerous, clearly defined responsibilities beyond simply distributing the corpus for the sole use of one beneficiary.

The court concluded that the insurance proceeds should be distributed as directed by Thomas’s written designation for her life insurance beneficiary to Super for distribution and administration in accordance with the will.

Reference: Digest of Recent Opinions, Pennsylvania Law Weekly, 37PLW639 (July 8, 2014)

Filed Under: Estate Planning; Trust & Estate: Trust & Estates Litigation

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