Are Life Insurance Proceeds Subject To Probate?

Probate is the court-monitored process of settling a person’s estate after they pass away. This can involve inventorying the assets of the deceased, responding to creditor claims, handling disputes, and ultimately distributing the property to the estate’s beneficiaries. The process can be long and costly, and many people try to help their loved ones avoid it.

A common strategy used to avoid probate is to purchase a life insurance policy, and possibly use it in conjunction with a trust. Our Daytona Beach estate administration attorney explains in further detail below.

Do Life Insurance Proceeds Go Through Probate? 

Generally speaking, the proceeds generated from a life insurance policy are not subject to the probate process. Life insurance policies typically designate a beneficiary and they can receive the proceeds soon after the policyholder’s death. Essential planning is critical, though, as there are instances that can result in life insurance proceeds being subject to probate.

When are Life Insurance Proceeds Subject to Probate? 

While life insurance proceeds are not generally subject to probate, there are certain instances in which they may be. One of these is if the beneficiaries are not set up properly. For example, if a beneficiary has not been named on a policy, the proceeds will likely be subject to probate because the deceased’s wishes are unclear and so state law will decide. Additionally, if vague language is used such as ‘my children,’ it can cause issues with blended families and estranged children.

There are also times when the beneficiaries may pass away before the policyholder. These instances will be treated as though there is no beneficiary at all and so, the proceeds will be subject to probate. After life insurance proceeds have gone through probate, they will be distributed according to the deceased’s will or the intestacy laws in Florida.

How to Ensure Life Insurance Proceeds Avoid Probate 

The most common way to ensure life insurance proceeds avoid probate is to avoid the common mistakes outlined above. Always ensure beneficiaries on life insurance policies are up to date and designated properly. Also be sure to name contingency beneficiaries if the primary has passed away or is unavailable.

For more complex estates, establishing a trust and naming it as the beneficiary can also help the proceeds avoid probate. After you pass away, the life insurance proceeds will be added to the property within the trust. You can outline clear instructions for how you want all trust property to be distributed. Establishing a trust can provide additional layers of discretion and protection for families.

Call Our Estate Administration Attorney in Daytona Beach for a Consultation 

Just as it is important to review your estate plan regularly, it is just as critical that you review your life insurance policy to ensure it provides the protection your family needs. At Bundza & Rodriguez, our Daytona Beach estate administration attorney can advise you of your legal options and execute the documents to include in your plan. Call us today at 386-252-5170 or chat with us online to request a consultation and to learn more about your legal options.

Source:

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0733/0733ContentsIndex.html