Distribution of Net Proceeds in Tennessee Wrongful Death Cases

The conventional wisdom is that net proceeds[1] from wrongful death cases in Tennessee are distributed under the law of intestate succession. However, while our wrongful death statutes expressly tell us that wrongful death proceeds are free from the claims of creditors,[2] they do not mention use of the law of intestate succession as a method of distribution of the monies.

The most recent support for the proposition that distribution of wrongful death proceeds follows the law of intestate succession is Kline v. Eyrich, which makes the pronouncement in dicta in a footnote.[3] Other cases frequently cited for the proposition, Foster v. Jeffers[4] and Anderson v. Anderson,[5] reach the same conclusion, but frankly do not contain an extended discussion of why that conclusion was reached. Century-old decisions cited in Foster and Anderson are of little help in understanding the law.

The best statutory support for the conclusion that the law of intestate succession applies to the distribution of wrongful death proceeds is the language of Tenn. Code Ann. §20-5-108. It provides that “[t]he damages shall go to the surviving spouse and next of kin free from the claims of creditors.” This is the statute cited in Anderson as support for the conclusion that the law of intestate succession applies. Since an action for wrongful death did not exist at common law and thus is a creature of the legislature, §20-5-108 gives some support for the conclusion that the monies should be distributed under the law of intestate succession because the use of the phrase “surviving spouse and next of kin” uses language familiar to descent and distribution law. Moreover, nothing in the law suggests that the proceeds pass pursuant to the will of the decedent, and thus it just makes common sense that the law of intestate succession applies.

In any event, Tennessee’s law of intestate succession is set forth in Chapter 2 of Title 31 of the Tenn.Code Ann. The chapter covers a myriad of scenarios under which people may inherit from another in the absence of a will.

Let’s discuss the application of the statute under a common scenario. Bob dies in a motor vehicle accident, leaving behind only his wife, Sally. The net wrongful death proceeds are $600,000. The law of intestate succession makes it clear that she receives 100 percent death proceeds, and that Bob’s parents and siblings (if any) recover nothing.[6]

If Bob had left behind only Sally and one child, Sally would receive one-half of the net proceeds and the surviving child would receive the other half.[7] If Bob had been survived by Sally and two of Bob’s children, Tenn. Code Ann. § 31-2-104(a) and (b) would require that Sally receive one-third of the proceeds ($200,000) and each child would receive the same amount. If Bob left behind Sally and three children, Sally would receive the minimum of one-third of the net proceeds ($200,000), and each child would receive one-third of the remaining two-thirds ($400,000 total; $133,333.33 each).[8]

If Bob was not survived by a spouse, the net wrongful death proceeds would be divided equally between his children.[9] If Bob was survived by neither a spouse nor children, the wrongful death monies would be distributed to his parent or parents equally.[10] Chapter 2 of Title 31 has provisions for other scenarios as well.

The wrongful death law provides one important limitation on the right of a surviving spouse to collect settlement proceeds. The surviving spouse loses the right to receive any proceeds of a wrongful death settlement or judgment if he or she abandoned the decedent “as described in [Tenn. Code Ann.] § 36-4-101(a)(13) or otherwise willfully withdrawn [sic] for a period of two years.”[11] Presumably, the wrongful death proceeds would then be distributed as if the surviving spouse pre-deceased the wrongful death decedent, although there is no case yet on point.

A second limitation on the ability to receive wrongful death proceeds is Tenn. Code Ann. §31-1-106, known as the “Slayer Statute.” This law cuts off the right of inheritance when the potential beneficiary intentionally kills or conspires to kill the decedent. Once again, the wrongful death proceeds would be distributed as if the killer (or one conspiring with the killer) had pre-deceased the wrongful death decedent. By its terms, the statute does not apply to “any killing done by accident or self-defense.”

A third limitation on the ability to receive wrongful death proceeds arises in cases involving the death of a child. Ordinarily, when a minor child dies, the parents recover and would equally divide the net wrongful death proceeds.[12] This is true even if the parents are divorced and one parent has custody of the child.[13] However, Tenn. Code Ann. § 20-5-107 (c) provides that “a parent who has intentionally refused or neglected to pay any support for a child for a two-year period, or for the life of the child, whichever is less, when subject to a court order requiring the payment of child support and who has intentionally refused or neglected to contact the child or exercise visitation during such period” cannot recover wrongful death proceeds.[14]

There is one other issue that bears discussion on this topic. Gayle Malone, a prominent Nashville lawyer, argues that a surviving spouse has a right to elect against the intestate share of wrongful death proceeds and recover the greater amount permitted under the elective share statute. This statute provides as follows:

The surviving spouse of an intestate decedent who elects against taking an intestate share, or a surviving spouse who elects against a decedent’s will, has a right of election, unless limited by subsection (c), to take an elective-share amount equal to the value of the decedent’s net estate as defined in subsection (b), determined by the length of time the surviving spouse and the decedent were married to each other, in accordance with the following schedule:

\If the decedent and the surviving spouse were married to each other: The elective-share percentage is:
less than 3 years 10 percent of the net estate
3 years but less than 6 years 20 percent of the net estate
6 years but less than 9 years 30 percent of the net estate
9 years or more 40 percent of the net estate

Under this view, a surviving spouse with a marriage of nine years or more to the decedent would always elect against the law of intestate succession’s application to wrongful death proceeds if the decedent left behind two or more children. Why? Because under the law of intestate succession, the survivor would receive one-third of the net proceeds and, if he or she were permitted to proceed under this statute, he or she would receive 40 percent of the monies (an increase of 6.67 percent over the share he or she would have received under the intestate succession statute).

This is a creative argument. In my mind, giving a surviving, long-term spouse with two or more minor children a 40 percent share of wrongful death proceeds certainly is more equitable than the distribution of the lesser amount mandated by the intestate succession statutes. The survivor must raise the children, and the greater amount would (presumably) improve the lifestyle of the children during their minority. Of course, one can see the potential for a nasty fight on this issue if the surviving spouse is not parent of the decedent’s children, or if the children are adults and do not have a good relationship with the surviving parent.

There is no appellate case directly on point on this issue, but it is only a matter of time before this issue reaches our appellate courts.

Tennessee’s wrongful death law continues to present challenges for Tennessee lawyers. The use of the intestate succession statute to distribute net proceeds is an efficient method of calculating the money due to the statutory beneficiaries.

Notes

  1. The use of the phrase “net proceeds” means those monies remaining after payment of medical bills, subrogation interests, funeral expenses, and attorneys’ fees and expenses. There are several interesting issues that arise concerning these deductions, but those issues are beyond the scope of this article. Likewise, this article will not address the impact of comparative fault of a wrongful death beneficiary on his or her ability to recover wrongful death proceeds.
  2. Tenn. Code Ann. § 20-5-106.
  3. 69 S.W.3d 197, 201 fn. 3 (Tenn. 2002).
  4. 813 S.W.2d 449, 452 (Tenn. Ct. App.1991).
  5. 366 S.W.2d 755 (Tenn. 1963).
  6. Tenn. Code Ann. §31-2-104(a)(1),
  7. Tenn. Code Ann. § 31-2-104(a) (2).
  8. Id.
  9. Tenn. Code Ann. §31-2-104(b)(1).
  10. Tenn. Code Ann. §31-2-104(b)(2).
  11. Tenn. Code Ann. §20-5-107 (c). This poorly drafted provision was added to the Code effective May 30, 2011. I assume that it applies to wrongful death cases arising from deaths occurring on or after that date, but the statute is not clear on that point.
  12. Tenn. Code Ann.. §31-2-104(b)(2). If by chance the minor child was married, the child’s surviving spouse would be entitled to the proceeds and the decedent’s parents would be entitled to no recovery.
  13. Mangrum v. Owens, 917 S.W.3d 244, 246 (Tenn. Ct. App. 1995).
  14. In the event a parent has failed to pay child support but the non-payment does not rise to the level of extinguishing his or her right to recover wrongful death proceeds, Tenn. Code Ann. § 20-5-107 (b) requires that the arrearage be paid, plus interest, before a wrongful death recovery can be made.

John Day JOHN A. DAY a lawyer in Brentwood, Tenn., has practiced wrongful death and personal injury law for more than 30 years. He is a Fellow of the American College of Trial Lawyers.