Does A Will Control Over a Beneficiary Designation?
Can a court, carrying out the terms of a will, control the disposition of a non-probate asset? No. Non-probate assets are not controlled by the terms of a will, even if the will explicitly attempts to dispose of the asset. Instead, if the non probate asset has a beneficiary designation, that beneficiary designation will control the disposition of the asset.
In Hall v. MetLife, 750 F.3d 995 (8th Cir. 2014), the deceased, Dennis Hall, acquired an employment-related insurance policy and designated his son, Dennis II, as beneficiary. Several years later, Mr. Hall married Jane. Some years later, Mr. Hall became terminally ill.
Prior to death, Mr. Hall did two things to attempt to make his wife the beneficiary of the life insurance policies. First, he prepared a new beneficiary designation form making his wife the beneficiary of the policy, but never sent the form into the insurance company. The insurance plan, which was governed by ERISA, required that the beneficiary form be sent into the insurance company within 30 days of being signed to be effective. Second, he prepared a will, directing that all life insurance benefits payable as a result of his death be paid to his wife.
The insurance company refused to recognize the spouse as the beneficiary of the life insurance, and litigation ensued.
The Court first determined that, as an ERISA plan that gives the administrator the discretionary power to interpret plan documents and make eligibility determinations, a federal court is permitted to review the administrator’s’ decisions for abuse of discretion. The Court held that Met life did not abuse its discretion in refusing to give effect to a change of beneficiary form that was submitted long after the thirty-day window had expired.
The Substantial Compliance Doctrine Does Not Apply
The spouse argued that the substantial compliance doctrine of federal law permits a court to recognize a change in beneficiary form when the employee came close but did not fully comply with the requirements to change a beneficiary. In rejecting this argument, the Court explained:
But that a court may decide as a matter of common law to excuse technical non-compliance with the terms of an ERISA plan does not mean that an administrator with discretion under an ERISA plan is forbidden to enforce strict compliance with plan requirements. The courts in Davis, Phoenix, and similar cases were tasked with determining the proper beneficiary in interpleader actions, not reviewing an administrator’s decision for abuse of discretion under ERISA. See, e.g., Metro. Life Ins. Co. v. Johnson, 297 F.3d 558, 560, 567-69 (7th Cir. 2002); Davis, 294 F.3d at 933; Hartford Life & Accident Ins. Co. v. Wilmore, 31 F. App’x 832 (5th Cir. 2002) (per curiam); Phoenix, 30 F.3d at 558. We, too, have recognized that when an administrator is granted no discretion and a denial of benefits is reviewed de novo, a reviewing court may look to federal common law “to construe disputed terms in a plan.” King, 414 F.3d at 998. In that situation, application of the substantial-compliance doctrine might be appropriate. Cf. BankAmerica Pension Plan v. McMath, 206 F.3d 821, 827-28 (9th Cir. 2000).
The Court also concluded that Metlife acted reasonably in determining that the will was inadequate to control over a beneficiary designation or effect a change in beneficiary.
Dennis’s will addressed bequests from his estate. The estate was not a beneficiary of the policy, and Dennis’s will–unlike the will in Liberty Life Assurance Co. of Boston v. Kennedy, 358 F.3d 1295, 1297 (11th Cir. 2004)–did not expressly address the distribution of assets that were not part of the estate. Although Dennis’s will directed that “[a]ny and all life insurance and benefits shall be distributed to Jane Marie Hall,” that command followed shortly after the direction “that the following specific bequests be made from my estate.” It was thus reasonable for MetLife to construe the will to address only life insurance proceeds that were property of the estate. MetLife did not abuse its discretion simply because the will might be amenable to an alternative interpretation. See Rutledge v. Liberty Life Assurance Co. of Bos., 481 F.3d 655, 659 (8th Cir. 2007).