Blown Deadlines: How Insurance Proceeds Meant for a Trust Wind Up in an Estate

By: George J. Taylor

With so much invested in life insurance and other end-of-life planning, wouldn’t it be a sin for a blown deadline to send a death benefit past a trust and into the grips of an estate?

People set up a trust with the hope that upon their passing, proceeds from an individual or group life insurance policy, an annuity or endowment contract, a benefit plan, or a health or accident policy will go seamlessly to the trust vehicle.

In Florida, that only happens if the trustee claims the proceeds within six months of the insured’s passing.

What if the named trustee refuses the appointment, resigns, is incapacitated, or dies, and any successor trustee similarly refuses the appointment—and no claim is made on the policies or proceeds in a timely manner?

Under Florida law (Florida Statute § 733.808), if a claim for the proceeds isn’t made within six months, the money will go to the estate, which can then be used to pay the estate’s liabilities or be probated.

Talk about the best laid plans going awry.

This statute is somewhat arcane; few attorneys are familiar with it.  It’s only come up once in my career in a matter where the attorneys missed the six-month deadline, and I was retained to clean up the mess.  In that case, and for reasons related to the often-thankless nature of the trustee’s job that I won’t get into here, the named trustee declined the position.

The deadline was missed, and the significant death benefit was put into a perilous situation.  Lesson: don’t hire attorneys who dabble in estate and trust litigation.

The following steps can help avoid this headache:

• Watch the calendar. The trustee or an attorney hired to represent the beneficiaries must stay atop this and other deadlines related to these insurance and benefit plan payouts.
• Seek a professional or corporate trustee. This type of trustee is in the business of serving in a fiduciary capacity. Since it’s their job, deadlines hopefully won’t be missed.
• Ask the court to appoint a trustee. If, for the reasons above, no trustee is available, a trust beneficiary, or other party that may be affected by the outcome, may ask the court to appoint a trustee to oversee such matters.
• Hire an estate and trust attorney. If you anticipate an issue with a trust provision or the named trustee, or you know the clock is ticking, an estate and trust attorney versed in such matters will meet filing deadlines and help avoid such headaches.

The best laid plans may indeed go awry if deadlines are ignored or unknown.  Make sure your plans and proceeds are protected.

George J. Taylor is a partner in Brinkley Morgan’s Estate and Trust Litigation and Business Litigation practice groups in its Fort Lauderdale, Florida, and Boca Raton, Florida, offices.