Life insurance proceeds that are left to a beneficiary are exempt from creditors in Kentucky, as long as the beneficiary is not a co-signer to the insured person's debt. If the beneficiary of the life insurance policy is the estate, creditors can go after life insurance proceeds upon the insured person's death.
Owner/Agent, Pelfrey Financial Services, Lexington, KY
Life insurance must be distributed to a beneficiary and not the estate to remain exempt from the deceased’s creditors. The beneficiaries’ creditors would be able to go after the life insurance proceeds.
Most retirement accounts and cash value within a life insurance policy are exempt from creditors and can be retained, even through bankruptcy. One way creditors sometimes get to the funds is if life insurance proceeds are deposited into what was a joint checking account that the creditor had access to. While a person may be able to have the funds returned through legal proceedings, it is often best to close the joint account and open a new account.
That is a great question! This is one of those cases where planning ahead can save you a ton of worries later. To avoid the hounding of creditors, the proceeds must be left to a named beneficiary. That beneficiary must not be a legal partner to the debt in question, not co-signed, or otherwise legally obligated. Creditors will try to make you think that you have to pay anyway, in hopes that you will, but as long as there are no strings that tie you to that debt, it passes with the loved one. Thanks for asking!
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Most retirement accounts and cash value within a life insurance policy are exempt from creditors and can be retained, even through bankruptcy. One way creditors sometimes get to the funds is if life insurance proceeds are deposited into what was a joint checking account that the creditor had access to. While a person may be able to have the funds returned through legal proceedings, it is often best to close the joint account and open a new account.