Tennessee Court Reviews Probate Dispute Regarding Distribution of Annuities and Life Insurance Policies

In some estate cases, the court is called upon to determine the ownership and distribution of certain assets that may not typically be subject to probate, such as insurance policies, retirement accounts, and other accounts with named beneficiaries.  In an April 17, 2017 case from the Court of Appeals of Tennessee, the parties’ disagreement concerned annuities and insurance policies paid for by the decedent.  After the trial court ruled that the assets should be transferred to the estate and the decedent’s grandchildren, the executor appealed.

The decedent in the case was survived by her two sons, one of which was the executor of her last will and testament.  The will provided that the sons were to share equally in the decedent’s residuary estate.  Before her death, the decedent had taken out insurance policies on the grandchildren’s lives, but no beneficiary was named in them.  In addition, certain annuities paid for with the decedent’s money were listed in the executor’s name and had never been owned by the decedent.

On appeal, the court first considered the matter of the insurance policies on the grandchildren.  Although no beneficiary was listed on either policy account, the trial court ordered that each of the grandchildren be named as the owner of their respective policy.  However, the appeals court held that there was no legal basis to support the result.  Without any designated beneficiaries on the insurance policies at the time of the decedent’s death, the court explained that the policies were subject to probate and are to be distributed in accordance with the terms of the will.  Accordingly, the appeals court reversed the lower court’s decision transferring the policies to the grandchildren, and it ordered that they are transferred to the estate.  The policies are then subject to distribution as part of the residuary estate, to be divided equally between the two sons.

The executor next argued that he owned the annuities that the trial court ordered to be transferred to the estate and grandchildren.  The appeals court noted that the executor testified under oath that the annuities had been funded by the decedent’s money and that he was handling the annuities for her.  The executor also stated that the annuities were assets of the estate.  The appeals court explained that while it may have been the decedent’s intention for the grandchildren to get the two smaller annuities the executor was handling for her, that intention was not reflected in her will.  As a result, the court held that all of the annuities were general estate assets, subject to distribution as part of the residuary estate provided for by the will.

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