Tennessee Court Finds Designated Beneficiary Entitled to Life Insurance Proceeds Despite Decedent’s Intentions

When planning the distribution of your estate and probate, it is important to understand the legal consequences of naming beneficiaries on non-probated assets.  In a February 28, 2017 opinion, the Court of Appeals of Tennessee considered whether evidence of the decedent’s intent was relevant in deciding the matter of her life insurance proceeds.  The decedent in the case had a life insurance policy designating her husband and sister as beneficiaries.  The husband filed suit to recover the proceeds left to the sister and place them in a trust for the benefit of his and the decedent’s son.  The trial court concluded the son was entitled to the proceeds based on the theory of promissory estoppel, and the sister appealed.

The decedent had been diagnosed with terminal cancer when her son was twelve years old.  A few years later, her husband discovered he had terminal cancer and was not expected to outlive the decedent.  The decedent’s life insurance policy initially named her husband as sole beneficiary.  However, the decedent added her sister as a co-beneficiary of her life insurance policy a few weeks before her death, unbeknownst to her husband.  Her husband believed that she left half the proceeds to her sister for the purpose of taking care of their son, who was a minor and would soon have no living parents to take care of him.  When the husband became concerned that the decedent’s sister was going to use the proceeds for purposes other than his son’s welfare, he filed a complaint against her and the life insurance company.

In the circuit court proceedings, the husband relied on a document created by the decedent that allocated $30,000 to her sister, her sister’s children, and her mother, and the substantial remainder of her sister’s share of the proceeds to the decedent’s son.  There was also testimony by several parties regarding the decedent’s wishes that the insurance proceeds be used by her sister to care for her son.

On appeal, the court noted that an insurance policy is a contract between the policy owner and the insurance company.  When interpreting an insurance policy, therefore, courts in Tennessee do not look outside the four corners of the document when there are no ambiguities, because a party’s intent is irrelevant when the language of the policy is clear and unambiguous.

Accordingly, the appeals court explained that no amount of evidence establishing the decedent’s wish that the money be used for her son’s benefit could change the fact that the decedent named her sister as a co-beneficiary and that she was entitled to the proceeds of the policy.  The court went on to state that equitable remedies cannot be considered in the case because the express terms of the insurance policy controlled the outcome.

At MHPS, our skilled Nashville attorneys can provide legal guidance to people engaged in the estate planning process or probate administration.  We have experience handling complex estate matters as well as crafting the appropriate trust to meet the individual needs of our clients.  Schedule an initial consultation to learn more about our services by calling (615) 800-7096 or submitting a contact form online.

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