Your Legal Rights at Work

What Happens To A Life Insurance Policy In Probate?

by Lewis Hamilton

The items that make up an estate can range from a home and vehicles to checking accounts and a coin collection. One commonly overlooked asset is the proceeds from a life insurance policy. To find out how such an asset is addressed after the death of a loved one, read on.

Assets Subject to Probate

The wide-ranging array of assets most people own are treated differently during probate depending on what they are and how they are designated. Probate is the legal process that addresses the deceased's estate to ensure that beneficiaries may inherit and that the creditors of the estate are paid what they are owed. Unfortunately, probate can take several months to run its course, and often it can be expensive to pay the court fees associated with it.

Because of those things, probate is often spoken of in negative terms, and methods of keeping assets out of probate are plentiful. It must be emphasized that probate may be required in some case;, however, the probate may be shorter or simplified if there is little to no property left open to probate.

To keep estate assets away from probate, steps can be taken to place special provisions on property. These include:

  1. Real estate deeds can be altered (known as life estates in some places) to allow the placement of names onto the deed. At the owner's death, the property passes automatically to the surviving names on the deed with no need to probate the property.
  2. Payable-on-death or total-on-death designations can be easily added to bank accounts and investment accounts that automatically pass the asset to named persons.
  3. Trusts can be created to take the place of a will. Any asset mentioned in both a will and a trust is handled directly by the trust and never goes to probate.

Life Insurance Proceeds

The proceeds of a life insurance policy are yet another means of keeping assets out of probate and may be the oldest of the methods. Life insurance has never been subject to probate but instead goes to the named beneficiary on the policy. This benefit has made life insurance proceeds a convenient way to help survivors pay for the final expenses of their loved one. The only time that life insurance policy proceeds would have to be probated is when the beneficiary proceeds the deceased in death.

For more guidance on creating an estate plan that makes things simple for your loved ones after your death, speak to an estate attorney like those at Johnson/Turner Legal.