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When does life insurance become part of an estate?

On Behalf of | Aug 7, 2023 | Probate | 0 comments

Some assets will not have to go through probate because they are not part of your estate. However, sometimes non-probate assets manage to become part of an estate anyway, such as your life insurance policy.

Since you may count on your surviving family members getting your insurance payout soon after your death, you should know about any situations that may cause your life insurance to end up in your estate and thus into probate.

When the beneficiary is your estate

According to the Florida Courts website, your life insurance policy goes through probate if the assigned beneficiary on the policy is your estate. In fact, this standard applies to other accounts that may pay out after your death, such as annuities or retirement accounts. By contrast, an account that directly pays out to another person can avoid probate.

When the current beneficiary dies

Even if you have designated a younger family member to receive your insurance payout, consider the possibility that your beneficiary could still die before you do. If this should happen and there is no other beneficiary, your policy will likely become part of your estate after you die.

To avoid this possibility, your insurance policy could name one or more backup beneficiaries. In the event your first beneficiary dies, your policy will pay out to the contingent beneficiary instead of your estate.

If your life insurance policy goes to your estate, the money contained in your policy could become subject to creditor claims and other probate delays. Taking steps to steer your insurance away from probate could help your family weather the difficult days and weeks following your death.