## Facts

- Connecticut General issued a life insurance policy on John W. Aughenbaugh’s life in 1965.
- In 1967, Aughenbaugh executed a new will and created the John W. Aughenbaugh Revocable Insurance Trust, naming First National Bank of Minneapolis as trustee.
- The policy was designated to fund the trust, and the bank (as trustee) was named beneficiary of the policy; the trust beneficiaries were Aughenbaugh’s then-wife, Elizabeth Ann, and their three children.
- The trust was revocable but required specified formalities for “major changes,” including revocation or amendment, such as trustee written approval/consent.
- Aughenbaugh and Elizabeth divorced in 1972; in 1973 he married Marilyn L. Melaas (Marilyn Aughenbaugh) and later moved to Arizona with her.
- In October 1973, Aughenbaugh executed a document titled “Will” stating it would supersede and cancel prior wills or trusts; Marilyn retained the document.
- The trustee did not receive written notice of revocation and did not provide written consent to any revocation or amendment of the trust.
- After Aughenbaugh’s death, Connecticut General filed interpleader; the insurer deposited proceeds with the court and was dismissed.
- Marilyn claimed the 1973 will revoked the trust and entitled her to the policy proceeds; the trustee claimed the trust was never effectively revoked and proceeds belonged to the trust.

## Issues

1. Whether a settlor who reserved a power to revoke a revocable insurance trust by specified inter vivos procedures can revoke the trust solely by executing a later will containing general language canceling prior wills and trusts.
2. Whether failure to comply with the trust’s stated revocation formalities leaves the trust and the policy beneficiary designation in favor of the trustee in effect.

## Decision

- The Minnesota Supreme Court affirmed the judgment for First National Bank of Minneapolis as trustee.
- The court held the insurance trust was not revoked by the 1973 will.
- The court ordered the life insurance proceeds payable to the trustee under the existing beneficiary designation.

## Legal Principles

- A revocable life insurance trust is a valid inter vivos trust and is not rendered testamentary merely because the settlor retained a power to revoke.
- Where a settlor reserves the power to revoke a trust by an inter vivos transaction, the trust cannot be revoked by will.
- A trust that specifies a method for revocation or amendment must be revoked or amended in the manner the instrument requires; general testamentary revocation language is insufficient without compliance with the trust’s required formalities.

## Conclusion

Because the insurance trust was an inter vivos trust and the settlor did not follow the trust’s required inter vivos revocation procedure (including trustee written consent/approval), the later will did not revoke the trust, and the life insurance proceeds were properly paid to the trustee for the trust beneficiaries.


Connecticut Gen. Life Ins. Co. v. First Nat'l Bank of Minneapolis, 262 N.W.2d 403 (Minn. 1977)