Sexton v. Cornett
| Decision Date | 13 January 2006 |
| Docket Number | Record No. 050643. |
| Citation | 623 S.E.2d 898 |
| Court | Virginia Supreme Court |
| Parties | Christie Coltrane SEXTON v. Virginia CORNETT, et al. |
Randall B. Campbell, Roanoke, for appellant.
Thomas M. Jackson, Jr., Hillsville; R. Christopher Munique (Lacy, Campbell & Munique, on brief), Wytheville, for appellees.
Present: HASSELL, C.J., LACY, KEENAN, KOONTZ, KINSER, and AGEE, JJ., and RUSSELL, S.J.
OPINION BY Senior Justice CHARLES S. RUSSELL.
This appeal involves the interplay between two statutory schemes, the laws providing for a surviving spouse's right to claim an elective share in a deceased spouse's augmented estate, Code §§ 64.1-13 through 64.1-16.4, (the augmented estate laws) on one hand, and the laws exempting certain life insurance proceeds and vested retirement benefits from legal process, Code §§ 51.1-124.4, 51.1-510 and 38.2-3339 (the exemption laws) on the other.
The parties submitted a stipulation of facts to the trial court. James Dean Sexton died intestate on August 31, 2003. He had been employed by the police department of the Town of Wytheville and by virtue of his employment was entitled to group life insurance administered by the Virginia Retirement System (VRS). He also had vested retirement benefits administered by VRS. At the time of his death, the value of his VRS life insurance was $68,392.88 and his VRS retirement benefits amounted to $27,394.60. His estate contained no other assets.
Sexton had no children. He was survived by his wife, Christie Coltrane Sexton (the widow). They had separated before his death and divorce proceedings were pending between them. Sexton had designated his wife as the beneficiary of his VRS life insurance and retirement benefits in 1994. He executed new VRS forms two months before his death, however, designating his sister, Virginia S. Cornett and her infant daughter, Lolly M. Cornett, (the beneficiaries) sole beneficiaries of his VRS life insurance and retirement benefits.
After Sexton's death, his widow filed a petition for a determination of her elective share in his augmented estate, naming the beneficiaries as defendants. The petition claimed that the life insurance proceeds and retirement benefits should be included in the augmented estate of the decedent and that the widow should be allowed one-half thereof as her elective share. The trial court appointed a guardian ad litem to represent the interests of the infant defendant.
Upon the stipulated facts and exhibits, the trial court, in a letter opinion, ruled that the value of the life insurance proceeds and the value of the retirement benefits should be added to the augmented estate pursuant to Code § 64.1-16.1, but that nevertheless, that section "does not bring the actual benefits and life insurance proceeds into the estate." Noting that the proceeds of group life insurance policies are exempted by Code § 38.2-3339 from application "by any legal or equitable process or operation of law" to any debt or liability of any person who has a right under the policy, the trial court held that the insurance proceeds and retirement benefits were not a part of the augmented estate and that the widow had no claim upon them. Because Sexton's estate had not been made a party to the suit, the trial court held that it had no jurisdiction to enter any orders except to rule upon the widow's claim to the insurance and retirement benefits. We awarded the widow an appeal.
The General Assembly, in 1990, revised the former laws relating to wills and decedent's estates to provide a new system of augmented estates in lieu of the former system of dower and curtesy rights, effective January 1, 1991. 1990 Acts, ch. 831. The new system was designed to preclude one spouse from disinheriting the other by transferring his property to third parties during his lifetime and thus depleting his estate, Chappell v. Perkins, 266 Va. 413, 421, 587 S.E.2d 584, 588 (2003), a feat easily accomplished at common law, Gentry v. Bailey, 47 Va. (6 Gratt.) 594 (1850).
Under the new system, the value of any property having an aggregate value exceeding $10,000 transferred to or for the benefit of a donee by the decedent within the calendar year of his death, or within any of the five preceding calendar years, is to be included in the augmented estate. Code § 64.1-16.1(A)(3)(d). Further, persons such as the beneficiaries who are "original transferees from or appointees of the decedent" are "subject to contribution to make up the elective share of the surviving spouse," § 64.1-16.2(c), although the surviving spouse's right can be waived. Dowling v. Rowan, 270 Va. 510, 517-18, 621 S.E.2d 397, 400-01 (2005).
When the decedent is not survived by children or their descendants, the surviving spouse is entitled to one-half of the augmented estate. Code § 64.1-16. The designation of a person as beneficiary under a life insurance policy is a gift from the insured, even though the gift is revocable and its enjoyment is postponed. Walker v. Penick's Ex'r., 122 Va. 664, 672, 95 S.E. 428, 431 (1918). The same reasoning applies to a designation of a person as beneficiary of vested retirement benefits. Thus, if the augmented estate laws are read in isolation, the assets held by these beneficiaries, as donees of the decedent's property within the year prior to his death, are clearly subject to the widow's claim.
On the other hand, the General Assembly has, for many years, maintained a legislative policy of exempting VRS life insurance proceeds and retirement benefits, in the hands of their designated beneficiaries, from attack of any kind. Code § 51.1-510, pertaining to VRS life insurance, provides in pertinent part: "[T]he insurance provided for in this chapter, including any optional insurance, and all proceeds therefrom shall be exempt from levy, garnishment, and other legal process." Code § 51.1-124.4, pertaining to VRS retirement benefits, provides in pertinent part: ...
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...Inc., 67 Va. Cir. 69 (Fairfax 2005)............................................................ 274 Sexton v. Cornett, 271 Va. 251, 623 S.E.2d 898 (2006)........................................................................................... 730 Shackleford v. Beck, 80 Va. 573 (1885)..........
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