Life insurance will only go into the estate if the named beneficiaries are deceased and the beneficiaries were not changed or if the estate is the named beneficiary. It is important to review your policies to make sure they are properly set up. I have ran into occasions for example where a husband and wife die close together and didn't have time to change the beneficiary. If a contingent beneficiary had been named, that beneficiary would have received the money. Because no contingent beneficiary was named the money went to the estate.
Co-Founder, Coastal Financial Partners Group, California
Life insurance proceeds can go the estate of the insured on purpose or by accident but there is no reason they should. Naming a beneficiary and reviewing periodically is usually the right thing to do.
If the estate is the beneficiary, the access of the heirs to any money associated with the life insurance policy is delayed because the money must go through probate. Probate may, in some cases, cause a delay of a year or more. Life insurance proceeds left to the estate, like any asset left to the estate, are forced through the probate process and therefore become part of the public record, so privacy is lost. Perhaps most importantly, in most states, the money paid into probate becomes subject to the claims of creditors of the estate.
It's almost always a bad idea to have your estate listed as the beneficiary of your life insurance but I see policies that list it that way fairly often.
You wantyo always have a living adult listed as your beneficiary and have a 2nd living adult as you backup or contingent beneficiary. That way the payment from your life insurance will bypass the estate and be paidtto your beneficiary with no probate costs or delays. It will also prevent creditors from having access to your life insurance benefit.
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If the estate is the beneficiary, the access of the heirs to any money associated with the life insurance policy is delayed because the money must go through probate. Probate may, in some cases, cause a delay of a year or more. Life insurance proceeds left to the estate, like any asset left to the estate, are forced through the probate process and therefore become part of the public record, so privacy is lost. Perhaps most importantly, in most states, the money paid into probate becomes subject to the claims of creditors of the estate.
You wantyo always have a living adult listed as your beneficiary and have a 2nd living adult as you backup or contingent beneficiary. That way the payment from your life insurance will bypass the estate and be paidtto your beneficiary with no probate costs or delays. It will also prevent creditors from having access to your life insurance benefit.