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Does Life Insurance Go Through Probate?

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One of the major benefits of life insurance is its ability to bypass probate. Therefore, it allowed the amount to be paid out directly to the beneficiaries. However, there can be situations where life insurance proceeds become part of the deceased person’s estate and go through probate. So, does life insurance go through probate? How can you ensure that your loved ones receive the maximum benefit from your life insurance policy? We break it down for you. 

does life insurance go through probate

What is probate, and how does it work?  

If a deceased person has a will, then the probate process acts as a legal procedure to ensure that the estate is evenly distributed to the beneficiaries.   

The executor or personal representative named in the will files a petition in court to start probate. However, without a will, the court will appoint a personal representative. As a result, the personal representative will be granted estate authority.  

Consequently, the personal representative will gather and value all estate assets, pay off any debts or taxes owed by the deceased, and distribute the remaining assets to the beneficiaries. After paying all debts and distributing assets, the personal representative will file a final report with the court to end probate.  

Does life insurance go through probate?

A life insurance payout is directly made to the beneficiary of the policy. However, if the will specifies otherwise, the proceedings from the policy will be subjected to the probate process. As a result, the distribution will take place in accordance with the will. 

In other words, if the policy names a beneficiary, that person will get the money. But if the person’s estate is named as the beneficiary of the policy, the proceeds may have to go through the probate process. 

In addition, if there is no beneficiary listed on the policy, then the insurance payout will go through probate. Therefore, it will ensure that the insurance proceeds are distributed properly.  

When does a life insurance payout go through probate?  

Generally, life insurance is considered a non-probate asset. However, there are situations when a life insurance payout goes through probate. 

  • If it is mentioned in the will of the policyholder  
  • When the policyholder has not named any beneficiaries.  
  • If the policy has only a primary beneficiary who has been declared deceased.  
  • When all the beneficiaries have passed away.  
  • The name of your ex-spouse is still present as a beneficiary on the policy.  

How can you avoid probate for life insurance?  

You may feel the need to avoid probate for life insurance as there can be probate fees that are based on the percentage of your assets. The addition of your life insurance payout to your estate will increase its value and, therefore, the probate fees. 

  • Update the beneficiaries on your policy.  
  • Add secondary beneficiaries as well.   
  • Provide accurate information about the beneficiaries.  
  • Set up a trust if you have a large estate.   

Therefore, life insurance policies are one aspect of estate planning and should be considered alongside other estate planning documents, such as wills and trusts, to ensure that your assets are distributed according to your wishes with as little delay and expense as possible. 

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