Decedents' Estates July 2005 Flashcards
(4 cards)
Summary
The life insurance proceeds should probably be distributed to Sam because a beneficiary designation cannot, in most states, be changed by will. The joint tenancy bank account should be distributed to Sam unless it is established that, in creating the joint tenancy, Testator intended to give Sam check-writing privileges instead of an ownership interest. In some states, evidence of such intention would be sufficient to void the joint tenancy. Sam’s surviving child is clearly entitled to share in Testator’s estate; whether Sam’s deceased children also share depends on whether the state lapse statute applies to class gifts and, if so, whether it extends to class members who died before Testator’s will was executed.
In most states, a life insurance beneficiary designation cannot be changed by will. Thus, the insurance proceeds are probably payable to Sam.
In most jurisdictions, life insurance proceeds are payable to the beneficiary named in the beneficiary-designation form filed with the insurance company even if the insured names a different beneficiary in a later-executed will. This rule is typically justified as a matter of contract: as in this case, life insurance policies generally provide that policy proceeds will only be paid to a beneficiary named on an appropriate form filed with the insurance company; other possible methods of changing a beneficiary are thus viewed as being excluded by the insurance contract. See generally Cook v. Equitable Life Assurance Society of the U.S., 428 N.E.2d 110 (Ind. 1981).
However, some courts have rejected the majority rule on the grounds that the requirement that a beneficiary change be evidenced by a form filed with the insurance company is for the exclusive benefit of the company. These courts permit an insured to change a beneficiary designation by will if his insurance company does not object. See, e.g., Burkett v. Mott, 733 P.2d 673 (Ariz. 1986). If State A has adopted this minority approach, the insurance proceeds would pass to Doris under the terms of Testator’s will.
[NOTE: An applicant need not describe both the majority and minority approaches to receive credit. The revocability of a life insurance beneficiary designation by will does not appear to be addressed by any state statute.]
The surviving tenant of a joint bank account is ordinarily entitled to the account balance on the death of the other tenant. Some states will distribute the account balance as part of the deceased tenant’s probate estate if the evidence shows that the deceased tenant created the joint tenancy for his own convenience and had no intent to give the surviving tenant an ownership interest.
Ordinarily, a bank account in the name of “A and B” as joint tenants creates a right of survivorship. Upon the death of one tenant, the survivor takes the entire account balance. See Unif. Probate Code (UPC) §6-212 (amended 2003).
Where a joint tenancy was created merely for a depositor’s convenience, for example, to give the other co-tenant check-writing privileges, some courts will set aside the joint tenancy if the evidence shows that the depositor intended to convey only a power of attorney to write checks. The UPC has adopted this approach. See UPC §6-212 cmt. Other courts invariably affirm a joint tenancy, relying on the parol evidence rule to exclude evidence of the depositor tenant’s intentions. See William M. McGovern Jr. & Sheldon F. Kurtz, Wills, Trusts, and Estates§6.3 (3d ed. 2004); Bielecki v. Boissel, 715 A.2d 571 (R.I. 1998). And even among courts that permit a joint tenancy to be set aside, some require clear and convincing evidence of the depositor tenant’s intentions. See Franklin v. Anna National Bank of Anna, 488 N.E.2d 1117 (Ill. App. 1986).
In this case, there is no direct evidence that Testator intended to convey only check-writing privileges in Account #1. That Testator made all deposits and received all statements demonstrates nothing about his intentions, nor does the fact that Testator was concerned about his physical health. However, one might infer an intention to create a convenience account from Testator’s belief that he could bequeath this asset by will. Thus, Sam would prevail in a state that disallows evidence of depositor intentions and in a state that requires clear and convincing evidence to overturn a joint tenancy designation; it is possible that Doris would prevail in a state that permits a joint tenancy designation to be overturned by a preponderance of the evidence.
A constructive trust theory has sometimes been utilized to award a joint tenancy bank account to the beneficiary named in the depositor tenant’s will. Under a constructive trust approach, Sam would take the account but would hold the balance in the account in trust for Doris. However, the imposition of a constructive trust ordinarily requires evidence of misconduct, and there is no evidence of wrongdoing by Sam. Id.
The children of Ann and Bill can share in the residuary estate only if the shares they would have taken had they survived Testator pass to their issue under the governing lapse statute. This determination will depend on statutory interpretation.
The State A lapse statute provides that, “if a beneficiary who is a descendant of the testator predeceases the testator, the beneficiary’s surviving issue take the share the deceased beneficiary would have taken had the beneficiary survived.” The statute is silent regarding its application to class gifts and, if it applies to class gifts, whether it also applies to persons who died before the execution of the will creating a class gift.
At common law, a gift to a class (such as a group of persons related to each other through a common ancestor) implied a survivorship condition, with the result that only those class members who survived the testator shared in the gift. Under the common law approach, only Sam’s surviving child would take the balance of Testator’s estate. Some states with lapse statutes that do not specify whether they apply to class gifts utilize the common law approach.
Most state lapse statutes, either expressly or by judicial construction, do apply to class gifts. In these states, Bill’s child would take the share that Bill would have taken had Bill survived Testator because Bill was alive when Testator’s will was executed. See McGovern & Kurtz, supra§8.3 at 332.However, even when a lapse statute applies to class gifts, some states, by statute or case law, refuse to extend its reach to persons, like Ann, who predeceased both the testator and the execution of the testator’s will. The theory behind such a limitation is that, because the testator would have known that such person was dead when the testator executed his or her will, the testator would not have intended to include either the deceased person or that person’s issue in the class gift, unless the testator specifically made such a bequest in his will.
The 1990 UPC takes a different approach; anti-lapse protection is extended even to potential class members who died before the class gift was created. See UPC §2-603(b)(2). The UPC approach is based on the view that testators would not typically want to exclude the family line of a deceased class member. Under this approach, the children of both Ann and Bill would share in Testator’s residuary estate.
