Kentucky: Beneficiary Disputes and Interpleader Under Kentucky Law

KRS 381.280: conviction-based, and broader than homicide

Kentucky’s statute is unusual in two ways. It names insurance beneficiaries in its first sentence, and it covers abuse as well as killing:

“If the husband, wife, heir-at-law, beneficiary under a will, joint tenant with the right of survivorship or the beneficiary under any insurance policy takes the life of the decedent or victimizes the decedent by the commission of any felony under KRS Chapter 209 and in either circumstance is convicted therefor, the person so convicted forfeits all interest…”¹

Chapter 209 is Kentucky’s adult protection law. A beneficiary convicted of a Chapter 209 felony against the insured can lose the proceeds even if the beneficiary did not cause the insured’s death. Under subsection (2)(a) and (c), the Chapter 209 branch does not apply to a policy executed, or a felony committed, before January 1, 2012.¹

Where forfeited property goes. The forfeited interest “descends to the decedent’s other heirs-at-law, beneficiaries, or joint tenants, unless otherwise disposed of by the decedent.”¹ Only if no one remains does subsection (3) send it to the state by escheat, with the proceeds paid into the elder and vulnerable adult victims trust fund.¹

Reaffirmation exception. Under subsection (2)(b), there is no forfeiture where the decedent, with knowledge of the person’s disqualification, reaffirmed that person’s right to take, for example by executing a new or modified insurance policy.¹

The conviction requirement. The text requires that the person be “convicted therefor.” Where charges are pending, an interpleader court may have to wait for the criminal case before it can apply the statute.

Where ERISA displaces the statute

Many Kentucky policies are employer plans. In McFadden, the insured’s daughter, the claimant, had been indicted in connection with her mother’s death. The court did not need to decide whether ERISA preempted KRS 381.280: “Even if that statute is preempted by ERISA, she would be prohibited from taking the death benefit under federal common law if it is proven that she killed her mother and the killing was not the product of her own insanity, an accident, or committed in self-defense.”² The federal rule does not require a conviction. See federal programs and the slayer rule.

In Delph, another ERISA case, the court put it this way: “Here, Kentucky law is informative on but not equivalent to federal common law.”³

Powers of attorney and changes made by someone else

In Willock, the insured’s husband used a power of attorney to make himself beneficiary. The court began from the premise that “a power of attorney is a form of agency.”⁴ Because the power had been revoked, “Willock’s use of the power was invalid”, and the prior designee, a trust, took the proceeds.⁵

In Delph, a fiancée made an online beneficiary change, and the insured’s family alleged she did so without authority. Summary judgment was denied on that issue. See undue influence and capacity.

Decisions

Related guides

• State law differences
• Slayer rule
• Change of beneficiary
• ERISA post-distribution claims

Footnotes

1. Ky. Rev. Stat. § 381.280(1)–(3). Kentucky General Assembly. ↩ ↩² ↩³ ↩⁴ ↩⁵

2. Prudential Ins. Co. of Am. v. McFadden, No. 6:19-cv-051-CHB, slip op. at 11 (E.D. Ky. Dec. 3, 2020). GovInfo. ↩

3. Prudential Ins. Co. of Am. v. Delph, No. 6:18-cv-298-REW, slip op. at 18 (E.D. Ky. June 4, 2020). GovInfo. ↩

4. Metropolitan Life Ins. Co. v. Willock, No. 3:11-cv-00244-JHM, slip op. at 9 (W.D. Ky. Jan. 17, 2012). GovInfo. ↩

5. Willock, slip op. at 12. ↩