Opinion ID: 2325732
Heading Depth: 3
Heading Rank: 1

Heading: Recent Changes to Section 2704(c)(5)

Text: Section 2704(c) describes categories of persons and entities having an insurable interest in the life of the insured. Section 2704(c)(5) confers on the trustee of a trust an insurable interest in the life of the person who established the trust. On July 13, 2011, after the parties completed briefing, [80] the Governor signed Senate Bill No. 83, an Act to amend Titles 10, 12, 18, and 25 of the Delaware Code relating to judicial procedure, fiduciary relations, insurance and property. Section 17 of that Act addresses 18 Del. C. § 2704(c)(5). At the time that the parties briefed the certified questions, section 2704(c)(5) provided in relevant part that: The trustee of a trust established by an individual has an insurable interest in the life of that individual and the same insurable interest in the life of any other individual as does any person who is treated as the owner of such trust for federal income tax purposes. Section 2704(c)(5) now provides, in pertinent part, that: The trustee of a trust created and initially funded by an individual has an insurable interest in the life of that individual and the same insurable interest in the life of any other individual as does any person who is treated as the owner of such trust for federal income tax purposes without regard to: a. The identity of the trust beneficiaries b. Whether the identity of the trust beneficiaries changes from time to time; and c. The means by which any trust beneficiary acquires a beneficial interest in the trust. [81] Importantly, the prior statutory language did not limit who may be a trust beneficiary or require the beneficiary to have an independent insurable interest. The revised language expressly states that a trustee has an insurable interest without regard to the identity of the trust beneficiaries, whether the [trust beneficiaries] change ..., and the means by which any trust beneficiary acquires a beneficial interest in the trust. [82] The Synopsis of Senate Bill 83 states the revisions were intended to clarify the provisions of current law concerning when a trust has an insurable interest, meaning the recent changes did not alter the earlier statute. Thus, a trust has an insurable interest in the life of the person who established created and initially funded the trust without regard to whether the beneficial interest in the trust is subsequently sold or transferred.