Three Lessons from Collister: How to Avoid Unintended Consequences with Your Estate Plan

In my last post, I discussed a recent Court of Appeals decision, In re Estate of Collister. In this case, the court concluded that Washington’s Superwill statute (the Testamentary Disposition of Nonprobate Assets Act – RCW 11.11), which provides a mechanism for directing the distribution of certain nonprobate assets pursuant to a Will rather than the account beneficiary designations, did not apply to life insurance policies. In this post, I’ll be discussing three lessons learned from this case.

1. Reliance on the goodwill of others is not smart estate planning. In Collister, the testator, Carol Collister, named her ex-husband, Rocky Feller, as beneficiary of a life insurance policy on the policy’s beneficiary designation. When Carol drafted her Will four years later, she included provisions naming Rocky as Personal Representative of her estate and directing that the life insurance policy proceeds be split between her two sisters. Carol died approximately seven months later. Carol may well have believed that Rocky would have “done the right thing” in her mind and handed over the life insurance policy proceeds to her sisters. However, as Personal Representative, he did not have authority to distribute the life insurance policy proceeds other than as directed by the policy’s beneficiary designation. And he had no obligation to make a gift of the life insurance policy proceeds, either. It is not uncommon for an estate plan that relies on the goodwill of others – rather than the specific directions of the testator – to go awry. In a previous blog post, I discussed how a testator’s direction to one son to distribute certain property “as he sees fit” ended up with the son distributing it all to himself, a likely unintended result that the court upheld.
2. Choose the best tool from the toolbox. The Superwill statute was designed, in part, to allow someone, perhaps suddenly taken ill, to use their Will to direct the final disposition of their assets if updating the beneficiary designations on their accounts was not feasible due to their illness. Rather than relying on a stopgap solution to change how an account is to be distributed, if you’re able to change the actual beneficiary designations on your accounts, it makes sense to do so. That will be the best tool available to ensure that your wishes are carried out. In Collister, the Court determined that the Superwill statute did not apply to the distribution of life insurance proceeds. Carol could have decided, as stated by MacBeth, to “make assurance double sure” and likely avoided the entire dispute by updating the beneficiary designation on the policy itself, and not relied upon her Will to direction the distribution of the policy proceeds to her sisters.  Whenever possible, beneficiary designations on the policy itself should be updated. Directing in a Will that a nonprobate asset be distributed to someone other than an account beneficiary should be relied upon only if updating the account’s beneficiary designations is not possible, such as due to a sudden, terminal illness.
3. Consistency can help avoid conflict. In Collister, a $25,000 life insurance policy intended to provide a financial benefit to the policy holder’s survivors instead resulted in litigation that, in all probability, cost far more than the value of the policy. Consistent designations of who was entitled to the proceeds could have avoided this conflict.

Photo credit: Corey Leopold on Flickr