If the beneficiary of a life insurance policy is a person, the proceeds are paid directly to the beneficiary. If the beneficiary of the policy is the estate, then the death benefit does go into the estate to be distributed according to the will.
However, life insurance proceeds are subject to estate taxes whether or not the beneficiary is a person or the estate. If the value of the life insurance benefit plus the value of the estate exceed the $5.25 million exemption per person (in 2013), then putting the life insurance policy in an irrevocable trust may be a good idea. Talk to you tax adviser and a knowledgeable life insurance agent to make an informed decision.
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However, life insurance proceeds are subject to estate taxes whether or not the beneficiary is a person or the estate. If the value of the life insurance benefit plus the value of the estate exceed the $5.25 million exemption per person (in 2013), then putting the life insurance policy in an irrevocable trust may be a good idea. Talk to you tax adviser and a knowledgeable life insurance agent to make an informed decision.