The money that is paid out from life insurance polices to beneficiaries on the death of the insured does not necessarily need to go through the probate process. Probate is the procedure of settling the estate of a person who has died. An estate consists of property that the deceased owned at the time of death. Probate re-titles the property, putting it into the name of the person who was chosen to receive the property. The person who receives property from the person who died is known as the beneficiary.

Whether the money from a life insurance policy will go through probate depends on who is named as the beneficiary of the money. If an individual, other then the person that died, is named as the beneficiary of the insurance policy, then the money goes directly to the beneficiary, which saves time and money. This is because a life insurance policy is a contract with an insurance company that specifically states who will be paid money after the person who is insured dies. Since payment of the life insurance proceeds to the named beneficiary is in the contract, there is no need for the life insurance policy to go through probate.

Probate Process

On the other hand, if the estate of the person who died is the named beneficiary of the insurance policy or if no beneficiary was chosen, the insurance money becomes part of the estate and it must go through the probate process. If the insurance money must go through the probate process, the insurance company issues a check made payable to the probate court. The probate court then deducts any probate fees and attorney fees from the money and distributes the balance according to the will of the person who died. If there is no will then the money is distributed according to state law.

Can't Change Beneficiary Designation by Will

An insured cannot change the beneficiary designation by a provision in his will. The person named as beneficiary in an insurance policy will receive the insurance money no matter what is stated in a will. It is only when either the estate is named the beneficiary or no one is named as beneficiary that the proceeds end up in the probate process and may be distributed according to the will of the person who died.

Questions for Your Attorney

If you are interested in managing your finances and your property so that your family does not have to go through probate, you may want to contact an experienced estate planning attorney for advice.

You may want to ask your attorney the following questions:

  • What is the best method of leaving life insurance money to my spouse and children?
  • Is it better to set up a trust to receive the life insurance money or to name a beneficiary to directly receive the money?