In re Albert Anderson Life Ins. Trust

• Decision Date: 16 August 1940
• Docket Number: 8343.
• Citation: 293 N.W. 527,67 S.D. 393
• Parties: In re ALBERT ANDERSON LIFE INS. TRUST. v. NORTHWEST SECURITY NAT. BANK OF SIOUX FALLS. ANDERSON et al.
• Court: South Dakota Supreme Court

293 N.W. 527

67 S.D. 393

In re ALBERT ANDERSON LIFE INS. TRUST.

ANDERSON et al. v. NORTHWEST SECURITY NAT. BANK OF SIOUX FALLS.

No. 8343.

Supreme Court of South Dakota

August 16, 1940

Rehearing Denied October 22, 1940.

Appeal from Circuit Court, Minnehaha County; Lucius J. Wall, Judge.

In the matter of the Albert Anderson Life Insurance Trust. From an order approving a report of the acts of the Northwest Security National Bank of Sioux Falls as trustee under the trust agreement and allowing the trustee's petition for authority to pay a federal estate tax in the estate of deceased trustor, Natalie Anderson and others, objectors appeal.

Affirmed.

Odin R Davis, of Sioux Falls, for appellants.

Caldwell & Burns, of Sioux Falls, for respondent.

RUDOLPH Judge.

Prior to June 15, 1933, Albert Anderson of Sioux Falls, South Dakota, was the owner of five different policies of life insurance on his life totaling an amount of $17,000. On June 15, 1933, Albert Anderson and the Security National Bank & Trust Company of Sioux Falls entered into an agreement designated an insurance trust agreement, wherein it was agreed that Albert Anderson would designate the Security National Bank & Trust Company as beneficiary in the policies of life insurance, and the Security National Bank & Trust Company agreed to receive and disburse the proceeds of the policies upon the death of the insured in accordance with the terms and conditions set out in the agreement. Albert Anderson executed requests for changes of beneficiaries in the policies which were forwarded to the different insurance companies, whereupon the named beneficiary was changed in accordance with the trust agreement. Following the execution of this agreement, the Security National Bank & Trust Company was succeeded by the Northwest Security National Bank of Sioux Falls and a new agreement was entered into between Albert Anderson and the Northwest Security National Bank on the 17th day of April, 1937. In accordance with the terms of this new agreement, wherein the Northwest Security National Bank was to act as trustee, the beneficiary named in the different policies was again changed so as to correspond with the new agreement. Under each of said policies of insurance and under each of the agreements entered into by and between Albert Anderson and the named trustee, the insured, Albert Anderson, reserved the right to change the beneficiary without the consent of the beneficiary named in the policy to borrow money on the security of the policy; to assign the policy; to receive all the dividends paid under the policies during his lifetime; to change the policy from a participating policy to a non-participating policy; to surrender the policy and collect the cash surrender value thereof.

Albert Anderson died in January, 1938, and thereafter there was paid to the Northwest Security National Bank, as trustee, the amounts of the various policies of life insurance represented by the policies on the life of Albert Anderson. The bank proceeded to carry out the terms of the 1937 trust agreement and, in the course of its administration thereof, filed with the circuit court of Minnehaha County a report of its acts thereunder and a petition requesting authority to pay the federal estate tax in the estate of Albert Anderson deceased, which authority it claimed under the provisions of the 1937 agreement. Thereafter, Natalie Anderson, the surviving wife of Albert Anderson, deceased, and the executrix named in the will of Albert Anderson, Harold L. Anderson and Dorothy E. Anderson, son and daughter of Albert Anderson, deceased, filed objections to the report and the petition as filed by the trustee. These objections came on for hearing before the circuit court, and the circuit court entered its order approving the report and allowing the petition. The objectors have appealed from this order.

We have considered, and have had in mind when making the foregoing statement of facts, appellants' assignments of error Nos. 1, 2, and 3. These assignments, we are convinced, are without merit.

Appellants' principal contention and the troublesome contention in this case is that the trust arrangement constituted a testamentary disposition of property by Albert Anderson, without complying with the formality required for such disposition, that is, that the trust agreement was not executed, published and witnessed as wills are required to be executed, published, and witnessed under the laws of this state. Contentions similar to that which appellants here make have been before the courts in many jurisdictions. There is a practical unanimity of judicial opinion adverse to appellants' contention. See Lashley v. Lashley, 212 Ala. 255, 102 So. 229; Shaw v. Johnson, 15 Cal.App.2d 599, 59 P.2d 876; Sigal v. Hartford National Bank & Trust Co., 119 Conn. 570, 177 A. 742; Gurnett v. Mutual Life Insurance Co., 356 Ill. 612, 191 N.E. 250; Kendrick v. Ray, 173 Mass. 305, 53 N.E. 823, 73 Am.St.Rep. 289; In re Soper's Estate, 196 Minn. 60, 264 N.W. 427; Tootle-Lacy National Bank v. Rollier, 341 Mo. 1029, 111 S.W.2d 12; In re Estate of Reynold, 131 Neb. 557, 268 N.W. 480; West Jersey Trust Co. v. Read, 109 N.J.Eq. 475, 158 A. 113; Bose v. Meury, 112 N.J.Eq. 62, 163 A. 276; Fidelity Title & Trust Co. v. Graham, 262 Pa. 273, 105 A. 295; Fidelity Trust Co. v. Union National Bank, 313 Pa. 467, 489, 169 A. 209, certiorari denied, 291 U.S. 680, 54 S.Ct. 530, 78 L.Ed. 1068; Carter v. Carter, 321 Pa. 391, 184 A. 78; Waterhouse v. Waterhouse, 29 R. I. 485, 72 A. 642, 22 L.R.A.,N.S., 639; Legrande v. Legrande, 178 S.C. 230, 182 S.E. 432, 102 A. L.R. 582.

The Restatement of the Law on Trusts in its comment on Section 57, Page 178, states the rule as follows: "If a person takes out a policy of insurance upon his life payable to a third person as trustee, the intended trust is not testamentary although the insured person reserves power to change the beneficiary of the policy and power to revoke or modify the trust. In such a case a present trust is created the beneficiary of the policy holding his rights as beneficiary in trust. This is true whether the beneficiary of the policy is designated in the policy as trustee, or whether the policy is payable to him without mention of any trust but he agrees with the insured to hold the policy or its proceeds in trust for a designated person. The result is the same where the policy is payable to the insured person or his estate and is transferred by him to another person as trustee. The disposition is not invalid although the trustee has no active duties to perform until after the death of the...