Equitable Life Assurance Soc. v. Porter-Englehart

Brief Fact Summary. Defendant Widow Sandra Porter-Englehart (Defendant Widow) of Testator Manfred Owen Englehart (Testator) appeals a lower court ruling in favor of Defendant Ex-Wife Merle (Defendant Ex-Wife) in a dispute about the proper division of insurance proceeds

Synopsis of Rule of Law. The creation of a trust does not depend on the words used, but rather on the clear intention of the parties to create the trust.

Facts. Testator had four children with Defendant Ex-Wife. In 1969, Defendant Ex-Wife and Testator were divorced. Notwithstanding, Testator executed a will in December, 1973, bequeathing his residuary estate to Defendant Ex-Wife as trustee for their children. The will contained the terms of the trust. Testator received two insurance policies from his employer in 1974. Later in 1974, Testator married Defendant Widow. This marriage, by operation of law, revoked the will executed prior to the marriage. Evidence indicated that Testator was unaware of this revocation that occurred as a matter of law. Testator named as the beneficiaries of his insurance policies Defendant Ex-Wife as trustee for his children (with a 70% beneficiary allocation) and Defendant Widow (with a 30% beneficiary allocation). Six months later, Testator was killed in a car accident. Plaintiff Insurance Company (Plaintiff) brought this matter to settle the insurance policy disbursements. Defendant Ex-Wife contends that
70% of the insurance proceeds are payable to her as trustee for her children in pursuance of the beneficiary designations. Defendant Widow argues that the proceeds should pass via intestacy into Testator’s estate (of which Defendant Widow is the administrator) since remarriage invalidated Testator’s 1973 will and therefore vitiated the beneficiary designations.

Issue. Did the revocation as a matter of law due to marriage of a will that establishes a trust comprised of insurance proceeds vitiate the beneficiary designations of the insurance policies?

Held. No. The insurance policy beneficiaries stand as designated by Testator, regardless of the revocation as a matter of law of Testator’s will. A life insurance policy is a not a will but a contract entered into between the insured on one side, and the insurance company. The policy proceeds are to be paid to the beneficiary designated within the contract. Therefore, money so paid does not pass by will, or by the laws that regulate intestate succession. Instead, satisfying the beneficiary is the contractual responsibility of the insurer, not the fiduciary responsibility of the administrator. Life insurance policies may create valid trusts. Such trusts, however, are inter vivos and not testamentary. This is because the trusts pass present interests created by contract and not by will. The rights of the beneficiary of the life insurance policies are vested when the designation is made in accordance with the terms of the contract of the insurance. They take complete effect that that ti
me. These benefits do not wait for their efficacy upon the happening of a future even. As such, these benefits are in no manner modified or increased at the time of the death of the insured. Finally, the existence of a trust does not depend on the terminology used. Instead, whether a trust was created depends upon the intention of the parties manifested by their words and conduct and the end that is to be accomplished. No particular form of words is required to create the trust. Instead, the existence of a trust should be ascertained from the intention of the parties. Here, Testator clearly intended to create a trust as he stated in his will, executed subsequent to his divorce. Several different documents may be used to demonstrate the intention to create a trust. In light of the surrounding circumstances, it seems that Testator intended to create a trust with the execution of his will and acceptance of his insurance policies. In no manner is this trust effected by intestacy laws.

Discussion. Again, the court here seeks to fulfill the testator’s intent. Since the testator seemed not to be aware of the revocation of his will as a matter of law because of his marriage, there is no evidence that Testator intended to revoke the named beneficiaries of his insurance policies.