State Farm Life Insurance Company v. Fort Wayne National Bank

474 N.E.2d 524 (1985)

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Nature of the Case

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Facts

James owned 95% of Zimmerman Excavating Service, Inc., while his son, Steven, owned the remaining 5%. In 1975, James purchased insurance on his life from Robert Houser of State Farm Insurance (Ds). Steven was named beneficiary, and the undisputed purpose of this policy was to fund Steven's purchase of stock in the event of James' death. On April 1, 1980, James died. The insurance proceeds were paid to Steven, but because the policy named James as owner, the proceeds passed through his estate causing a $34,373.97 tax consequence. P sued Ds. The trial court concluded that Ps were negligent in that they knew the purpose of this policy, but failed to advise James of the consequences. Had Steven been named as owner, the estate would have saved $34,373.97 in state and federal taxes. Ds appealed.