§ 36C-4-401.1. Interest of trustee as beneficiary of life insurance or other death benefit sufficient to support inter vivos or testamentary trust. - North Carolina Statutes

§ 36C‑4‑401.1. Interest of trustee as beneficiary of life insurance or other death benefitsufficient to support inter vivos or testamentary trust.

(a)        The interest of atrustee as the beneficiary of a life insurance policy is a sufficient propertyinterest or res to support the creation of an inter vivos or testamentary trustnotwithstanding the fact that the insured or any other person or personsreserves or has the right to exercise any one or more of the following rightsor powers:

(1)        To change the beneficiary;

(2)        To surrender thepolicy and receive the cash surrender value;

(3)        To borrow from theinsurance company issuing the policy or elsewhere using the policy ascollateral security;

(4)        To assign thepolicy; or

(5)        To exercise anyother right in connection with the policy commonly known as an incident ofownership of that policy.

The term "life insurancepolicy" includes life, annuity, and endowment contracts, or any variationor combination of those contracts, and any agreement entered into by an insurancecompany in connection with life, annuity, or endowments contracts.

(b)        The interest of atrustee as the beneficiary of a death benefit under an employee benefit plan orgroup life insurance policy is a sufficient property interest or res to supportthe creation of an inter vivos or testamentary trust notwithstanding the factthat the insured, employer, insurer or administrator of the plan reserves orhas the right to revoke or otherwise defeat the designation or assignment or toexercise any one or more of the rights or powers incident to employee benefitplans or group life insurance policies.

The term "employeebenefit plan" includes pension, retirement, death benefit, deferredcompensation, employment, agency, retirement annuity, stock bonus, profit‑sharingor employees' savings contracts, plans, systems or trusts; and trusts,securities or accounts established or held under the federal Self‑EmployedIndividuals Tax Retirement Act of 1962, the federal Employee Retirement IncomeSecurity Act of 1974, or similar legislation. The term "group lifeinsurance policy" includes group life, industrial life, accident, andhealth insurance policies having death benefits.

(c)        A testator havingthe right to designate the beneficiary under a life insurance policy, employeebenefit plan, or group life insurance policy described in subsection (a) or (b)of this section may designate as that beneficiary a trustee named or to benamed in the testator's will whether or not the will is in existence at thetime of the designation. The proceeds received by the trustee shall be held anddisposed of as part of the trust estate under the terms of the will as theyexist at the death of the testator. If no trustee makes claim to the proceedswithin six months after the death of the testator, payments shall be made tothe personal representative of the estate of the testator unless it isotherwise provided by an alternative designation or by the policy or plan. Theproceeds received by the trustee is not subject to claims against the estate ofthe testator to estate or inheritance taxes to any greater extent than if theproceeds were payable directly to the beneficiary or beneficiaries named in thetrust. The proceeds may be commingled with any other assets that may properly becomepart of the trust, but the proceeds shall not become part of the testator'sestate for purposes of trust administration unless the will expressly soprovides. (1957,c. 1444, s. 1; 1977, c. 502, s. 2; 1999‑337, s. 7(j); 2005‑192, s.2.)