Connecticut General Life Insurance Co. v. First National Bank of Minneapolis
1977 Minn. LEXIS 1291, 262 N.W.2d 403 (1977)
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Rule of Law:
If a trust instrument specifies the method for revocation, the settlor must adhere to that method for the revocation to be effective; a general revocation clause in a subsequent will is insufficient if it does not comply with the trust's specified procedure.
Facts:
- On February 2, 1965, Connecticut General Life Insurance Co. issued a life insurance policy to John W. Aughenbaugh.
- On May 4, 1967, John Aughenbaugh executed the John W. Aughenbaugh Revocable Insurance Trust, naming First National Bank of Minneapolis as trustee and his then-wife, Elizabeth Ann Aughenbaugh, and their children as beneficiaries.
- The trust agreement specified that revocation required a "written instrument executed by Donor and delivered to any trustee... during Donor’s lifetime."
- In November 1972, John Aughenbaugh and Elizabeth Ann Aughenbaugh divorced.
- In February 1973, John Aughenbaugh married Marilyn L. Melaas.
- On October 16, 1973, John Aughenbaugh executed a new will which stated it would "supercede and cancel any previous wills or trusts established by me."
- John Aughenbaugh entrusted the new will to his wife Marilyn but never delivered a written instrument of revocation to the trustee, First National Bank of Minneapolis.
- John Aughenbaugh died on October 21, 1973.
Procedural Posture:
- Connecticut General Life Insurance Co. filed a complaint in interpleader in the District Court in Hennepin County (trial court) to determine the proper beneficiary of life insurance proceeds.
- The insurance company deposited the disputed funds with the court.
- Following a trial without a jury, the district court ruled in favor of the First National Bank of Minneapolis, as trustee of the John W. Aughenbaugh Trust.
- Marilyn Aughenbaugh's motion for amended findings of fact, conclusions of law, and order for judgment was denied by the trial court.
- Marilyn Aughenbaugh (appellant) appealed the judgment to the Minnesota Supreme Court.
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Issue:
Does a clause in a will purporting to cancel any previous trusts effectively revoke an inter vivos life insurance trust when the trust instrument requires revocation via a written instrument delivered to the trustee during the settlor's lifetime?
Opinions:
Majority - Yetka, J.
No. A clause in a will cannot revoke an inter vivos trust when the trust document specifies an exclusive method for revocation that was not followed. First, the court established that a revocable life insurance trust is an inter vivos (living) trust, not a testamentary disposition, even though the settlor reserves the right to revoke it. The general rule of law is that where a settlor reserves the power to revoke a trust through an inter vivos action, such as providing notice to the trustee, the trust cannot be revoked by will. The trust instrument in this case explicitly required revocation to be accomplished by a written instrument delivered to the trustee during the settlor's lifetime. This provision provides maximum protection and certainty for the trustee. Since John Aughenbaugh's will was not delivered to the trustee during his lifetime, the attempted revocation was ineffective, and the trust remains valid.
Analysis:
This decision reinforces the principle that the specific terms of a trust instrument control its administration, including revocation. It solidifies the distinction between inter vivos trusts and testamentary instruments like wills, preventing subsequent, general testamentary language from overriding specific trust provisions. The ruling provides certainty for trustees, who can rely on the procedures outlined in the trust document without needing to investigate the settlor's other estate planning documents. For estate planners, this case underscores the importance of strictly adhering to a trust's amendment and revocation procedures to ensure the settlor's intent is effectively carried out.
