Opinion ID: 1736103
Heading Depth: 1
Heading Rank: 15

Heading: Life Insurance Proceeds

Text: Tipp contends that the county court erred in ordering her to return to the trust estate all of the proceeds received by her from the $25,000 life insurance policy on the life of Monroe held with MetLife. The policy itself is not in the record. Attached to Tipp's annual accounting, filed with the court on December 30, 2002, and received in evidence, is a report prepared by a certified fraud examiner who analyzed the assets held by Monroe at the time of his death. The report states that Tipp was designated as the beneficiary of a MetLife insurance policy, that benefits were paid to her in the amount of $23,060.49 on January 22, 2002, and that these funds were subsequently deposited by Tipp in one of her accounts. In a report filed April 7, 2003, Reinbrecht states that Tipp was paid $25,000.00 as the beneficiary of a life insurance policy from MetLife on the life of Monroe D. Rosenberg. Generally, life insurance benefits are a type of nonprobate transfer on death which is nontestamentary. See, Neb.Rev.Stat. § 30-2715 (Reissue 1995); In re Estate of Reynolds, 131 Neb. 557, 268 N.W. 480 (1936). The issue here is whether a trust was created with respect to the life insurance proceeds. Under the Nebraska Uniform Trust Code (NUTC), [a] trust may be created by: (1) transfer of property to another person as trustee during the settlor's lifetime or by will or other disposition taking effect upon the settlor's death.  (Emphasis supplied.) Neb.Rev.Stat. § 30-3827 (Cum. Supp. 2006). With regard to life insurance, we have generally recognized that a trust may be created in the death benefits. For instance, the insured may create a life insurance trust, where the trustee is named in the policy to hold the death benefits in trust for the benefit of others. See, In re Estate of Reynolds, supra ; 46A C.J.S. Insurance § 1423 (1993). See, also, 4 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 58:8 (1996). Likewise, a policy beneficiary may expressly agree to hold the death benefits as trustee for the benefit of others. See Estate of Devries v. Hawkins, 70 Neb. 656, 97 N.W. 792 (1903). Whether a trust has been created is a question of fact. The interpretation of the words of such a trust is a question of law. In re Estate of West, 252 Neb. 166, 560 N.W.2d 810 (1997). The trust agreement provides: Promptly after the execution of this agreement, the Grantor intends to designate the Trustee as the beneficiary of certain policies of insurance upon the life of the Grantor. The Grantor at any time also may name the Trustee as the beneficiary of additional policies of insurance upon the life of the Grantor or upon the lives of others, may have various death benefits made payable to the Trustee, and may transfer property to the trust during the Grantor's lifetime and by the Grantor's will. The trust agreement does not specifically refer to the MetLife policy, and the record does not reflect whether the policy was even in existence when the trust agreement was executed. There is no evidence that Monroe ever designated the trust or anyone acting in the representative capacity as trustee as the beneficiary of the policy. The record includes an inventory of Monroe's estate filed by Reinbrecht indicating that there was no insurance payable to the estate. The trust agreement reflects Monroe's objective to ensure that his issue will enjoy the benefits of and ultimately receive a substantial portion of the Grantor's estate. The agreement provides that upon Monroe's death, trust assets were to be distributed equally to his children and their issue. However, it is apparent from the record that during his lifetime, Monroe placed some but not all of his assets in the trust. He clearly could have designated the Trustee as the beneficiary of the MetLife policy, but there is no evidence that he did so. Tipp's obligation upon Monroe's death was to transfer the trust estate as then constituted to a separate Family Trust to be administered in accordance with the terms of the trust agreement. The trust estate is defined in the agreement as [t]he life insurance proceeds and any other property which the Trustee at any time may receive or acquire for the purposes of the trusts created by this agreement . . . . (Emphasis supplied.) We find nothing in the record reflecting a declaration by Monroe that Tipp was to hold the life insurance benefits as trustee. See § 30-3827(2). There is no competent evidence upon which to conclude that the life insurance benefits paid to Tipp were a part of the trust estate as defined in the trust agreement, and the county court therefore erred in ordering Tipp to pay the proceeds to Monroe's estate.