Change of Life Insurance Beneficiary While Divorce Pending Void Under Automatic Injunction
Tennessee case summary on automatic injunction in divorce.
The complaint in this Montgomery County, Tennessee, divorce case had recently been filed in 2012. Shortly after the case was filed, the mother began experiencing physical symptoms and was treated at the emergency room. Later that day, she sent a text message to her mother suggesting that the beneficiary of her life insurance policy, which was currently the husband. She suggested that this be changed to the child, with the grandmother being named to administer it. The next day, she was again hospitalized. In the hospital, the grandmother prepared a handwritten document, which the mother allegedly signed and had notarized, and this was submitted to the insurance company. Within a few days, the mother was no longer able to sign documents, and the grandmother signed them on her behalf. The mother died about a week later, and in accordance with the handwritten document, the insurance benefits were paid to the grandmother, in accordance with the handwritten document.
During the mother’s hospitalization, the father was not told of their child’s whereabouts. Nobody had informed the child of the seriousness of the condition, and the father was left to tell the child of the mother’s death when he finally picked up the child.
The grandmother then filed a dependency and neglect petition in juvenile court, and the grandmother was granted visitation in this proceeding. She later filed a petition for grandparent visitation under the Tennessee grandparent visitation statute, although nothing in that petition suggested that the father was trying to deprive her of visitation. In this proceeding, he also argued that he was entitled to the life insurance money, which totaled $400,000.
The notary who notarized the handwritten document testified that the mother was lucid at the time she signed. Even though the mother was later incapable of signing due to swelling of her hands, the notary testified that the mother was still able to sign the document. She also testified that there were no signs that the mother was under pressure when she signed.
The trial court, after listening to testimony which included handwriting experts, concluded that the change of beneficiary was invalid. The trial court noted that the handwritten form did not accomplish what the mother had originally expressed as her wish, that the child be named beneficiary, with the grandmother serving only as administrator. The form had named the grandmother beneficiary, with no explicit restrictions. It held that this constituted undue influence and voided the change of beneficiary. However, it did allow the grandmother to maintain control over the funds, to be held in trust for the child. The court did also grant the grandmother’s request for grandparent visitation.
The case was then appealed to the Tennessee Court of Appeals.
The appeals court first turned to the question of the life insurance proceeds. The father argued that the trial court should not have named the grandmother as the beneficiary, and the grandmother argued that the trial court should not have imposed the restriction that the funds be held in trust.
The father argued that any change in beneficiary was a violation of the Tennessee statute which imposes and injunction as soon as the divorce action is commenced. That temporary injunction prohibits either party from taking certain actions, including modifications of insurance policies.
The grandmother argued that the modification was actually made by the trial court, which has broad equitable discretion. Therefore, the mother’s signing of the change of beneficiary document was not in itself a violation of the automatic injunction. But the appeals court quickly rejected this argument, since the beneficiary document clearly came within the language of the statute.
The court then addressed the appropriate remedy for this violation of the injunction. After examining a number of earlier cases, it concluded that the proper remedy was to restore the status quo. In other words, it held that the change of beneficiary was void. It cited a 1982 case which held that a court could revoke a beneficiary change after death when the person making the change had been ordered not to do so.
For these reasons, the Court of Appeals ruled that the grandmother should be ordered to return the insurance proceeds to the husband.
The appeals court also addressed the grandparent visitation issue. It noted that the statute comes into play only when someone is trying to oppose the grandparent’s visitation. Even though the trial court believed that the father might oppose visitation in the future, this was not an appropriate reason to order visitation. In this case, especially because the petition was filed so soon after death, there was no evidence of the required opposition. Therefore, the Court of Appeals reversed the order, but encouraged the parties to work out a solution that would continue to facilitate a good relationship between the child and grandmother.
For these reasons, the Court of Appeals sent the case back to the lower court for adoption of an appropriate order.
No. M2015-00823-COA-R3-CV (Tenn. Ct. App. Oct. 20, 2016).
See original opinion for exact language. Legal citations omitted.
To learn more, see The Tennessee Divorce Process: How Divorces Work Start to Finish.