A carefully written will is often the hallmark of thorough estate planning. Hiring experienced wills and estates counsel can help avoid a distribution that strays from the original intent of the grantor. Massachusetts laws, federal tax obligations, and grammar are all items that must be considered when drafting any estate-related document. However, even in the presence of a clearly written document, courts may look to the behavior and actions of the grantor prior to her or his death to determine whether or not someone was entitled to a portion of the estate.
This can be seen in a recent Massachusetts Appeals Court decision that allowed a former employee, previously promised life insurance benefits, to recover the amount from the estate of her boss, who changed the beneficiary to his wife. In Shuttle v. Ligor (14-P-1670), the employee filed suit against the wife and the executor of the estate to obtain the proceeds of a life insurance policy after the benefits were distributed to the wife. The employee was previously the designated beneficiary of the policy after several years of working for the employer. Her boss advised her that she would be the beneficiary under a life insurance policy because he intended it to be a part of her “retirement plan as compensation for her working for less money than her performance merited.”
After he made this promise, his company began to struggle and was forced to lay off several employees and cut back salaries. The employee continued to work, even without a traditional salary, due to the promise of being designated the beneficiary of the policy. After the boss suffered a stroke, the employee asked whether or not he wished to change the beneficiary on his insurance policy, and he clearly expressed to her that he didn’t. The employee then used her own funds to pay some of the premiums of the life insurance policy and continued to perform work for the company. However, in the year following the stroke, the boss changed the beneficiary to his wife and did not inform the employee.
In its decision, the Appeals Court agreed that the employee was entitled to the amount of the policy benefits (approximately $63,000) based on her equitable interest in the insurance policy. Under well-established case law, if someone performs an action because of a promise made to them, they are considered to have detrimentally relied on the promise and earned an equitable interest. If someone, like this employee, was reasonably induced to act based on an offer made, the promise is treated like a contract in order to avoid injustice.
The Appeals Court, while upholding the determination against the executor, reversed the judgment against the wife. The court felt that merely benefiting from the latest designation was not enough to show the wife was unjustly enriched, absent fraud, mistake, or breach of duty. The court upheld the judgment against the estate but vacated the portion that held the wife jointly and severally liable for the policy amounts.
The Massachusetts estate planning attorneys at Karsner & Meehan can help you with protecting your family’s future. For a confidential consultation today, call our office at 508.822.6600.
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