§ 27-1-12-16 — Proceeds of life insurance; definition; payment to trustees

(A) The terms "proceeds" and "proceeds of
life insurance" and similar phrases used in this section mean and
include any and all benefits payable by the insurer by reason of the
death of the insured under any "life insurance," "policy of life
insurance," "insurance policy," "policy," or "annuity contract"
providing for benefits on the death of the insured, including individual
ordinary life policies, certificates issued under a group policy, annuity
contracts, and accident or health policies.
(B) Proceeds of life insurance policies heretofore made payable to
a trustee or trustees named as beneficiary or hereafter to be named
beneficiary under an inter vivos trust shall be paid directly to the
trustee or trustees and held and disposed of by the trustee or trustees as
provided in the trust agreement or declaration of trust in writing made
and in existence on the date of death of the insured, whether or not
such trust or declaration of trust is amendable or revocable or both, or
whether it may have been amended, and notwithstanding the
reservation of any or all rights of ownership under the insurance policy
or annuity contract; subject, however, to a valid assignment of any part
of the proceeds. It is not necessary to the validity of such trust
agreement or declaration of trust that it be funded or have a corpus
other than the right, which need not be irrevocable, of the trustee or
trustees named therein to receive such proceeds as beneficiary.
(C) A policy of life insurance or annuity contract may designate as
beneficiary a trustee or trustees named or to be named by will if the
designation is made in accordance with the provisions of the policy or
contract whether or not the will is in existence at the time of the
designation. The company shall, within sixty days after receipt at its
home office of proof of probate of the will, pay the proceeds of such
insurance or contract to the trustee or trustees designated in the
insurance policy or annuity contract, subject to a valid assignment of
any part thereof and any other provisions of the policy or contract,
unless prior to the actual payment by the company it shall have
received at its home office written notice of the filing or pendency of
(1) objection to the probate of said will, or (2) a suit to contest the
validity of said will or of the testamentary trust or trusts created therein
to which such proceeds are payable, or (3) petition for the construction
of that part of the testamentary trust designating the trustee or trustees:
Provided, however, That if the company makes any payment or
payments of proceeds to such trustee or trustees in accordance with the
terms of the policy or contract before receipt at the home office of such
written notice, said trustee or trustees shall give full acquittance
therefor to the company and such payment shall fully discharge the
company from all claims and liability to the extent thereof. Provided,
further, That if such written notice is received by the company,
payment by it of any unpaid proceeds may be delayed during the
pendency of said objections, suit, or petition for construction for not to
exceed one (1) year from the date of death of insured, and thereafter the
company may pay any and all unpaid proceeds due by reason of the
death of the insured to the clerk of the court wherein the probate
proceeding is pending by depositing them with such clerk who, as such
clerk, shall give full acquittance to the company for all proceeds so
paid and the company shall be fully discharged from any and all
liability and claims by or on behalf of any other person or persons
whomsoever to the extent of the amount so paid and deposited. The
clerk shall thereafter hold and disburse said proceeds in accordance
with the order of said court to the party or parties and in the amount or
amounts provided in said order upon receiving proper receipts therefor;
all Provided, however, That the procedure provided for herein shall not
preclude the company from interpleading or being interpleaded in any
appropriate proceeding or filing a bill of interpleader in any court of
competent jurisdiction.
(d) If no claim to proceeds is made by any trustee designated as the
beneficiary in any policy of insurance or annuity contract within one
year after the death of the insured or if satisfactory evidence is
furnished the insurance company within the one-year period showing
that there is or will be no trustee qualified to receive the proceeds,
payment may be made by the insurance company to those thereafter
entitled.
(e) The proceeds of insurance collected by the trustee or trustees are
not part of the testator's estate and are not subject to the debts of the
insured or to transfer, inheritance, or estate taxes to any greater extent
than if the proceeds were payable to some named beneficiary or
beneficiaries other than to the estate of the insured or executor or
administrator thereof.
(f) This section applies to all trustee designations of a beneficiary or
beneficiaries by an insured dying after June 15, 1967, regardless of
when made, naming a trustee or trustees of a trust or trusts established
by will.
If any provision of this section or the application thereof to any
person or circumstance is held invalid, the invalidity shall not affect
other provisions or applications of this section which can be given
effect without the invalid provision or application.
Formerly: Acts 1935, c.162, s.155b; Acts 1967, c.127,
s.4.