So, Does Life Insurance Have to Go Through Probate?

“If you don’t know where you’re going, you’ll end up someplace else.”  – Yogi Berra.

Yogi Berra was not only a great ballplayer, but some of the most clever, confusing-yet-still-true quotes are attributed to him.  And the above quote, with all of its folksy charm, says it all when it comes to probate matters and estate planning .  That is to say that you need to plan your estate when you are able to because you will likely be unhappy with the outcome if you don’t.

In connection with planning your estate properly, this article will answer a very important question for lots of heirs to a person’s estate:  Does life insurance have to go through probate?  Now, the short answer to that question is – in most circumstances – “no.”  However, it is important to understand why (and when) life insurance proceeds do not need to go through probate.  So, we invite you to read on.       

If, after reading this article, you have additional questions on getting your own estate planning started, then we welcome you to contact the Palm Beach County lawyers at Doane & Doane, PA.  Call today at 561-656-0200 or fill out our online contact form . 

When asking “does life insurance have to go through probate?” the answer, as noted above, is generally “no.”  The reason for that is because the money in a life insurance policy is really not a part of your estate, and normally never becomes an asset to the person who bought the policy.  

Commonly, when you get life insurance, you probably think of the amount of the policy as “your” money that will go to whomever survives you.  Technically speaking, that is not the case.  Rather, the insurance company holds that policy amount in trust for the beneficiaries of the policy and will not release that money until the person who bought the policy passes away.  When that event happens, then the policy agreement is triggered and the insurance company pays the beneficiaries of the policy.  

So, you see, the money in the life insurance policy never touches, in normal circumstances, the deceased person’s estate.  Instead, it goes straight from the insurance company’s coffers to the beneficiaries.  

The probate process – in which a court decides the validity of the decedent’s will and decides how assets will be distributed – is long, frustrating, expensive, and unpredictable.  In fact, for those planning their estates and beneficiaries alike, the less that needs to go through probate, the better particularly because the probate process is so onerous.

Thus, as a beneficiary of a life insurance policy, the moment the insured passes away, you have a claim to the life insurance proceeds without the need to worry about probate.  That means that you entirely bypass the whole probate court proceeding for those funds.  

Generally, you need to send the life insurance two documents to collect the life insurance proceeds, if you are the named beneficiary of the life insurance policy.  Those two documents are as follows: 

1. The original death certificate, and
2. The original life insurance policy.

Upon receipt, the insurance company will transfer the money directly to you, after you have designated how you would like to receive it.

Normally, you do not have to pay income tax on the insurance proceeds as a beneficiary of a life insurance policy. That is because the IRS does not consider death benefits from an insurance policy to be “income.”  However, if you do not take the insurance proceeds in a lump sum, then there may be tax consequences.     

Yes.  There are two specific scenarios when a life insurance policy will go through the probate process. 

1. Beneficiary pre-deceases the policyholder .  If the beneficiary of a life insurance policy dies before the insured dies.  Then, when the insured ultimately passes, the life insurance proceeds will be paid out to the insured’s estate (unless the insured changed beneficiaries on the policy before passing).

2. Life insurance payable to insured’s estate.   There are circumstances when it might make sense to have a life insurance policy be made payable to the estate of the insured.  Accordingly, if you take out a life insurance policy, and you make it payable to your estate, then when you pass away, the life insurance contract will operate as instructed, and the life insurance money will go into your estate.

The professionals at Doane & Doane can help answer the question, “ Does life insurance have to go through probate?” and many more probate questions.  Founded in 2003 by husband and wife legal team, Randell C. Doane and Rebecca G. Doane, Doane & Doane provides legal and financial services to families, individuals, and businesses throughout Southeast Florida.

Estate planning is about much more than just giving away property.  It is an act of love and kindness, with the ultimate goal of providing for the future financial security of your loved one. At Doane & Doane, our tax and estate professionals help people plan for retirement, consider various types of wills and trusts, make provisions for loved ones, figure out future child support, and minimize tax liability.  Experienced wills and trusts attorneys know which tools to use to get the best results for their clients.  Our lawyers can help you determine which tools are best suited to your specific circumstances.

When it comes to probate matters, such as the formal administration of an estate, Florida fiduciaries seek the assistance of the attorneys at Doane & Doane, P.A. to administer and manage their trusts and estates.  Notably, the founding partners of Doane & Doane are board-certified West Palm Beach Probate Attorneys .  With the additional advantage of certified public accountancy in their backgrounds, they present a unique combination of skills and experience which enables them to effectively settle, administer, and manage clients’ trusts and estates.

Since the day we opened our doors, we have worked hard to earn a reputation as one of the region’s most prominent tax and estate planning law firms in Palm Beach County, Florida. Our dynamic team includes the firm’s founding partners, experienced associate attorneys, and an outstanding team of paralegals, legal assistants, and support

Call the Palm Beach County lawyers at Doane & Doane, P.A.  You can reach us at 561-656-0200.  Call us today.

The information in this blog post is provided for informational purposes only and is not intended to be legal advice. You should not make a decision whether or not to contact an attorney based upon the information in this blog post. No attorney-client relationship is formed nor should any such relationship be implied. If you require legal advice, please consult with an attorney licensed to practice in your jurisdiction.