Redirecting Life Insurance – Don’t Use Your Will

The proceeds of life insurance can be made payable to a specific payee or to the insured’s estate. If the proceeds are payable to a specific person, then they usually are not affected by any instructions in the will. A recent case from Washington, Estate of Collister, No. 47278-3-II (Wash. App., Aug. 9, 2016), <>, clarifies what happens if there is a conflict between the policy beneficiary designation and a specific bequest of the proceeds in the will. Does the policy or the will direct who gets the proceeds?

Ms. Collister named her ex-husband, identified as a friend, the sole beneficiary of a life insurance policy. Several years later, she signed a will dividing her estate between the ex-husband and two sisters. The will specifically directed that the proceeds of the policy go to the sisters. The ex-husband was named executor. When she died, the sisters moved for an order to distribute the policy proceeds to them.

The case reached the Court of Appeals. The first question was whether Washington’s Testamentary Dispositions of Nonprobate Assets Act, RCW Ch. 11.11, <>, applied to the proceeds or directed a result in another way. Under the Act, nonprobate assets may be distributed under a will if the will clearly identifies them. This would seem to give the advantage to the sisters, but the Act also refers to another law to define nonprobate asset.” Even though most lawyers think of nonprobate assets as including everything that passes by some means other than the will, that statute specifically excludes life insurance from the definition. That didn’t mean, however, that the ex-husband automatically received the proceeds. The court ruled that the Act didn’t apply at all, but other legal principles might.

The court interpreted two previous cases in Washington to mean that when life insurance is payable to an insured, the insured’s estate, or an executor, the insured was allowed to direct distribution in his or her will. The ex-husband, however, was named in the policy as a friend, not as an executor. Nothing in the will directed the ex-husband, as the executor, to distribute the proceeds to the sisters, nor did the policy or will condition his acceptance on a duty to distribute the proceeds. There was not enough to indicate that Ms. Collister intended him not to benefit personally.

The court contrasted an earlier case in which the beneficiary of the insurance actually drafted the will for the insured, which named her as executor and included a specific set of instructions to pay the estate’s debts out of the proceeds. Because Ms. Collister did not make any similar indications of her intent, the court concluded that she intended the proceeds to go to the ex-husband in his own capacity, not as executor.

If you want to have your life insurance paid to someone, using the will to make that designation is risky. A far more certain way to achieve your intent is to send the insurance company a written instruction to change the beneficiary. If you want the policy to be available to pay debts and taxes, then you can designate the estate as a beneficiary and instruct in the will to pay the debts and taxes from the proceeds, or create a trust to receive the proceeds with instructions to the trustee to pay the debts and taxes. The lesson from this case is to be very clear about your wishes.


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