KRISTIE D. KIPHART, INDIVIDUALLY, AND AS TRUSTEE OF THE DEMAND RIGHT IRREVOCABLE TRUST FOR BRYCE A. BAYS APPELLANT
JOHN WESLEY BAYS APPELLEE
APPEAL FROM KNOX CIRCUIT COURT HONORABLE ROBERT W. MCGINNIS, SPECIAL JUDGE ACTION NOS. 07-CI-00631, 08-CI-00371, AND 09-CI-00246
BRIEF FOR APPELLANT: Kenneth M. Boggs Barbourville, Kentucky
BRIEF FOR APPELLEE: W. Patrick Hauser Barbourville, Kentucky
BEFORE: CAPERTON, DIXON AND VANMETER, JUDGES.
Appellant, Kristie D. Kiphart, as Trustee of the Demand Right Irrevocable Trust for Bryce A. Bays, appeals from a decision of the Knox Circuit Court awarding Appellee, John Bays, a curtesy interest in the proceeds of his deceased wife's life insurance policies. For the reasons set forth herein, we reverse and remand to the trial court for further proceedings.
In November 2000, Appellee and Carole Kiphart, now deceased, were married in Indiana. They had one child, Bryce Bays, who was six years old at the time of his mother's death. In August 2001, the couple executed reciprocal wills. In 2006, Carole was diagnosed with cancer and subsequently died on October 28, 2007.
Prior to her death and unbeknownst to Appellee, Carole executed a new will on September 15, 2007. Under the new will, Carole left to Appellee the following:
General Bequest of Personal and Household Effects With A Precatory Memorandum. I give and bequeath all of my personalty and household effects of every kind including but not limited to furniture, appliances, furnishings, pictures, silverware, china, other vehicles, and all policies of fire, burglary, property damage, and other insurance on or in connection with the use of this property, to my husband, John Wesley Bays, if he shall survive me . . . .
The new will also contained a handwritten holographic attachment making various specific bequests that are not the subject of this appeal. In addition, at the time of her death, Carole was insured under two policies of life insurance. The first, issued by American General Life, was in the amount of $750, 000. The second, issued by Prudential Insurance Company of America, was in the amount of $125, 000. Appellee was initially named the beneficiary under both policies. In April 2007, Carole changed the beneficiary of the Prudential policy to her son, Bryce. Subsequently, on the same date that she executed her new will, Carole also established two trusts, the Demand Right Irrevocable Trust for Bryce A. Bays and the Carole Kiphart Living Trust. She named Appellant Trustee of the Demand Right Trust, and named Appellee Trustee of the Living Trust. In conjunction with establishing the trusts, Carole changed the beneficiary on the American General policy to fund the first trust and, likewise, named the second trust as beneficiary on the Prudential policy. There is no dispute that the beneficiary changes were permissible under the terms of each policy.
In November 2007, Carole's will was admitted to probate and Appellant, her sister, was appointed Executrix. On December 13, 2007, Appellee filed a declaratory judgment action in the Knox Circuit Court renouncing the will pursuant to Kentucky Revised Statutes (KRS) 392.020 and KRS 392.080, and seeking to take his statutory share of the personalty and realty Carole owned at her death. The following July, Appellee filed a motion for partial summary judgment requesting that the trial court rule that certain gifts made to family members by Carole in the holographic attachment, as well as the proceeds of the insurance policies, were part of the estate for the purpose of calculating his statutory share pursuant to KRS 394.480. Appellee filed a second action in the trial court in July 2008, preserving his claim to monies he alleged he had given to Carole to be placed in their safety deposit box. Finally, in April 2009, Appellee filed a third action to have Carole's will declared void. In October 2009, all three actions were consolidated into the current case.
In November 2009, the trial court declared Carole's will invalid as it did not meet the statutory requirements of KRS 394.040. Subsequently, in August 2011, the trial court conducted a bench trial and thereafter rendered findings of fact and conclusions of law. Relevant to this appeal, the trial court found that Appellee had no knowledge until several weeks after Carole's death that she had executed a new will, changed the beneficiary of the life insurance policies,  or established the two trusts. Further, the court determined that Appellee did not consent to, or have knowledge of, the change of beneficiary on the two life insurance policies and declared Carole's actions to constitute fraudulent inter vivos transfers. Therefore, the trial court concluded that the insurance policies were the personalty of Carole's estate and included the value of both in the estate for the purpose of calculating Appellee's statutory share. On November 26, 2012, the trial court entered an order awarding Appellee the sum of $454, 093.38 plus interest. This appeal ensued.
The only issue on appeal concerns the trial court's rulings with respect to the life insurance policies. Appellant argues that the trial court erred in characterizing the insurance proceeds as personalty of Carole's estate. Appellant contends that proceeds of life insurance policies that have a named beneficiary other than the estate of the deceased insured are not personalty of the deceased and, therefore, are not ...