## Facts

- Albert Leslie Gordon executed a written agreement naming Portland Trust Bank as trustee and designating the bank as beneficiary of fifteen life insurance policies on his life.
- Gordon delivered the policies to the bank for safekeeping; the bank assumed no duty to pay premiums or manage the policies during Gordon’s life.
- The agreement stated it did not restrict Gordon’s lifetime rights under the policies, including borrowing against them, surrendering them for cash value, and exercising any policy options.
- The agreement stated the trust would become effective as to the life insurance policies upon Gordon’s death.
- Four days after executing the agreement, Gordon executed a will naming his wife, Leotta Belle Gordon, as executrix.
- After Gordon died, the bank collected $26,352.75 in policy proceeds and claimed the right to hold and distribute them under the trust agreement.
- The executrix sued at law to recover the proceeds for the estate, alleging the arrangement was testamentary and revoked by the later will.
- The trial court sustained the bank’s general demurrer; the executrix declined to replead, and judgment was entered for the bank.

## Issues

1. Whether an agreement designating a trustee as life insurance beneficiary, while reserving broad lifetime control to the insured and postponing distribution until death, creates a valid inter vivos insurance trust or an invalid testamentary disposition.
2. Whether a subsequent will can revoke or supersede the trustee-beneficiary designation and redirect the insurance proceeds to the probate estate.

## Decision

- The Oregon Supreme Court affirmed the judgment for Portland Trust Bank.
- The court held the agreement created a valid inter vivos life insurance trust founded on contract, not a testamentary disposition subject to will formalities.
- The court held the later will did not revoke the bank’s status as beneficiary-trustee or entitle the executrix to the insurance proceeds.
- Because the complaint showed no entitlement to the proceeds in the estate, sustaining the demurrer was proper.

## Legal Principles

- A beneficiary designation in a life insurance contract is generally contractual in nature and is not treated as a testamentary transfer merely because the proceeds become payable at death.
- An insured may validly designate a trustee as policy beneficiary and enter a written trust arrangement governing the proceeds without satisfying statutory requirements for executing a will.
- Broad reserved powers (e.g., borrowing, surrendering policies, changing benefits through policy mechanisms) may render the trustee’s interest contingent and defeasible, but do not by themselves convert an inter vivos insurance trust into a testamentary disposition.
- A will cannot revoke or alter a life insurance beneficiary designation where the policy and related agreement establish the beneficiary’s rights; changes must be made in the manner required by the policy.

## Conclusion

The court treated the trustee-beneficiary designation and trust agreement as a presently effective contractual arrangement governing life insurance proceeds, so the estate could not recover the proceeds through probate and the insured’s later will did not revoke the trust.


Gordon v. Portland Tr. Bank, 201 Or. 648, 271 P.2d 653 (Or. 1954)