Henderson's Estate, In re

• Decision Date: 17 July 1958
• Docket Number: No. 3,300,947,No. 3,300,947 and S,No. 319796,No. 319795,3,300,947,319796,319795,3,300,947 and S
• Citation: 395 Pa. 215,149 A.2d 892
• Parties: In re ESTATE of John R. HENDERSON, Deceased. Appeals of Ethel M. HENDERSON: In re Prudential Insurance Policy; In re Equitable Life Insurance Policy; In re Equitable Life Insurance Policy; In re Prudential Insurance Policy and Section I (d) of Decree of
• Court: Pennsylvania Supreme Court

Page 892

149 A.2d 892

395 Pa. 215

In re ESTATE of John R. HENDERSON, Deceased Appeals of Ethel M. HENDERSON: In re Prudential Insurance Policy No. 3,300,947; In re Equitable Life Insurance Policy No. 319796; In re Equitable Life Insurance Policy No 319795; In re Prudential Insurance Policy No. 3,300,947 and Section I (d) of Decree of July 17, 1958.

Supreme Court of Pennsylvania.

March 16, 1959.

William Jay Leon, Philadelphia, for Henderson's estate.

George M. Brodhead, Rawle & Henderson, Robert E. Jones, J. Welles Henderson, Jr., Philadelphia, for J. Welles Henderson, Jr., and Prudential Ins. Co.

William T. Campbell, Jr., Swartz, Campbell & Henry, Philadelphia, for Equitable Life Ins. Co. of Iowa.

Earle N. Barber, Jr., Philip A. Bregy, MacCoy, Evans & Lewis, Philadelphia, for Girard Trust Corn Exchange Bank, trustee under will of John R. Henderson, and Catherine K. Yardley.

Frank J. Eustace, Jr., Philadelphia, for Frank J. Eustace, Jr., guardian and trustee ad litem.

Robert A. Webster, Henry A. Frye, Moffett, Frye & Leopold, Philadelphia, for Ruth Bjornsgaard.

Before CHARLES ALVIN JONES, C. J., and BELL, MUSMANNO, BENJAMIN R. JONES, COHEN, and BOK, JJ.

BELL, Justice.

These appeals raise the following questions: (1) Is a widow who takes against her husband's will entitled thereby to share in the proceeds of certain policies of insurance upon his life; and (2) did the Orphans' Court have jurisdiction to decide the rights of the widow to the policies or the proceeds thereof?

John R. Henderson died on November 9, 1957, leaving a will dated October 28, 1957. Henderson in his will gave his personal effects to his son who was his only child, his residence to his wife, and his residuary estate in trust for his wife for her life and after her death to persons whose names and interests are immaterial. He left an estate of approximately $126,000. Unfortunately for his residuary legatees and for his widow's present claim, he included in his will a tax clause directing that all taxes be paid out of his residuary estate.

Henderson took out three policies of insurance on his life, all of which were in force at his death. On June 5, 1920, Henderson took out a life insurance policy with the Prudential Insurance Company of America in the amount of $10,000; and on February 18, 1926, he took out a life insurance policy with the Equitable Life Insurance Company of Iowa in the amount of $25,000. ¹ In each policy he reserved the right to change the beneficiary by written notice to the Company. In each policy his wife was originally named as the beneficiary. In each policy he changed the beneficiary several times--in each instance naming a beneficiary other than his wife. His final change in the Prudential policy occurred on April 28, 1952, at which time he named as beneficiary 'Ruth Bjornsgaard, Sister of the Insured, if living, otherwise Catherine K. Yardley, Friend of the Insured'. Both his sister and Miss Yardley survived Henderson. Henderson's final change of beneficiary in his Equitable policy occurred on January 17, 1952, at which time he named 'Catherine K. Yardley Primary Beneficiary, [and] First Contingent Beneficiary [his] Estate'. Miss Yardley survived Henderson. The insured paid all the premiums on each of these policies, and the policies at his death were found in his possession. Henderson's widow was never notified nor did she acquiesce in any changes of beneficiary.

Henderson's widow duly filed an election to take against his will and against the life insurance policies which she claimed were testamentary conveyances of her husband's assets.

The Wills Act of April 24, 1947, ² § 8, gives to a surviving spouse a right of election to take against the will of her deceased spouse. A surviving spouse who elects to take against the will, where the testator leaves only one child, '* * * shall be entitled to one-half of the real and personal estate of the testator'. It will, of course, be noted that 'the real and personal estate of the testator' is not defined, and that insurance is not mentioned.

A named beneficiary in a life insurance policy--where the insured reserves the right to change the beneficiary--has no vested interest in the policy or its proceeds during the insured's lifetime. While the authorities are not in accord as to whether the beneficiary's interest is testamentary, the later cases hold that such a beneficiary has only an expectancy. In re Bayer's Estate 345 Pa. 308, 26 A.2d 202; Knoche v. Mutual Life Insurance Co., 317 Pa. 370, 176 A. 230; Riley v. Wirth, 313 Pa. 362, 169 A. 139; Irving Bank, of New York v. Alexander, 280 Pa. 466, 124 A. 634, 34 A.L.R. 834; Weil v. Marquis, 256 Pa. 608, 101 A. 70; Fidelity Trust Co. v. Travelers' Insurance Co., 320 Pa. 161, 181 A. 594.

In Knoche v. Mutual Life Insurance Co., 317 Pa. at pages 371, 372, 176 A. at page 230, supra, the Court said:

'Where the right to change the beneficiary has been reserved in a life insurance policy, the beneficiary named has but a mere expectancy with no vested right or interest during the lifetime of the insured. Riley v. Wirth, 313 Pa. 362, 367, 169 A. 139; Irving Bank, of New York v. Alexander, 280 Pa. 466, 470, 124 A. 634, 34 A.L.R. 834; Weil v. Marquis, 256 Pa. 608, 614, 101 A. 70; 37 C.J. 579, § 345 * * *.

'Where, however, the designation of the beneficiary in the policy is absolute and unconditional because the right to change the beneficiary is not expressly reserved to the insured, the beneficiary has a vested interest in the policy and cannot be deprived of its proceeds by anything the insured may do without the beneficiary's consent * * *. Joyce on Insurance, 2d Ed., vol. 2, §§ 730a, 731; Smith v. Metropolitan Life Ins. Co., 222 Pa. 226, 71 A. 11, 20 L.R.A., N.S. 928; [Entwistle v. Travelers' Insurance Company, 202 Pa. 141, 51 A. 759]; Schuberth v. Prud. Ins. Co., 86 Pa.Super. 80.'

It was well settled, prior to 1948, that the proceeds of a life insurance policy which was payable to a named beneficiary other than the insured's executors or his estate,--irrespective of whether a right to change the beneficiary was or was not reserved by the insured-- were not a part of the insured's estate, and neither the widow, if she took against the will, nor his creditors (after his death) were entitled to any part thereof. In re Wilson's Estate, 363 Pa. 546, 70 A.2d 354; Burton's Estate, 20 Pa.Dist. & Co. 566, 567; 46 C.J.S. Insurance § 1157. Cf. Bayer's Estate, 345 Pa. 308, 26 A.2d 202, supra; Knoche v. Mutual Life Insurance Co., 317 Pa. 370, 176 A. 230, supra; Riley v. Wirth, 313 Pa. 362, 169 A. 139, supra; Irving Bank v. Alexander, 280 Pa. 466, 124 A. 634, supra; Weil v. Marquis, 256 Pa. 608, 101 A. 70, supra; Fidelity Trust Co. v. Travelers' Insurance Co., 320 Pa. 161, 181 A. 594, supra; 46 C.J.S. Insurance § 1157.

In Wilson's Estate, 363 Pa. at pages 549-550, 70 A.2d at page 355, supra, the Court said: '* * * Proceeds of life insurance policies made payable to designated beneficiaries are exempted from transfer inheritance tax * * *. They form no part of the deceased insured's estate: [citing cases].'

In 46 C.J.S. Insurance § 1157, the law is aptly stated:

'Policy Payable to Third Person

'The proceeds of a policy naming a third person as beneficiary generally belong to him as an individual and do not constitute part, or an asset, of the insured's estate.

'The proceeds of a life insurance policy in which a third person is named as beneficiary belong exclusively to such beneficiary as an individual; they are not the property of the heirs or next of kin of insured, are not subject to administration or the laws of descent governing the distribution of insured's personal property, and generally do not constitute any part, or an asset, of his estate.'

Some apparent inconsistencies in the authorities dealing with life insurance are sometimes explained by the accepted doctrine that life insurance is generally regarded as sui generis.

The Legislature may create or modify or destroy a wife's statutory right to take against her husband's will during the life of the spouse, but not after the spouse's death In re Crawford Estate, 362 Pa. 458, 464-465, 67 A.2d 124; Melizet's Appeal, 17 Pa. 449; Moninger v. Ritner, 104 Pa. 298; Scaife v. McKee, 298 Pa. 33, 148 A. 37.

The widow claims that her rights in these life insurance policies were changed and enlarged by the Estates Act of April 24, 1947, ³ and that one-half of the proceeds of the life insurance policies are included within her election to take against her husband's will and against these policies, under and by virtue of § 11 of that Act, and under In re Brown's Estate, 4 Pa.Dist. & Co. 722, which was affirmed in a brief Per Curiam opinion by this Court in 384 Pa. 99, 119 A.2d 513.

Section 11 of the Estates Act of 1947 pertinently provided: 'A conveyance of assets ⁴ by a person who retains * * * a power of revocation * * * over the principal thereof, shall at the election of his surviving spouse, be treated as a testamentary disposition so far as the surviving spouse is concerned * * *.' The word 'conveyance' is defined in § 1(2) of the Act as follows: "Conveyance' means an act by which it is intended to create an interest in real or personal property whether the act is intended to have inter vivos or testamentary operation.' 20 P.S. § 301.1(2).

Section 21 provides that the Act 'applie[s] only to conveyances effective on or after [January 1, 1948].' 20 P.S. § 301.21. The final change of beneficiary in each of these policies was made, it will be recalled, in 1952.

In appeal of McKean, 366 Pa. 192, 77 A.2d 447, this Court decided ⁵ that a surviving spouse who elected to take against the will was not entitled under § 11 of the Estates Act of April 24, 1947, to any share in the revocable inter vivos trust which was created by her husband in March, 1947. The trust was created prior to the Estates Act; that settlor died two years after the Estates Act. The...