Probate is a legal process that allows the court to ensure all your assets are distributed to the appropriate heirs.
This can be in accordance with the terms of your Will or, if there is no Will, in accordance with the state’s intestacy laws.
But there are some assets, like life insurance, that don’t require probate to be distributed to your heirs. This is because your beneficiary is designated in the policy document itself so it doesn’t need a court to decide how to distribute the proceeds.
But that doesn’t mean that your life insurance policy is exempt from probate – it’s not.
Many people make the mistake of naming their “estate” as the primary beneficiary to the policy. And if the estate inherits your policy proceeds, then those funds will go through probate just like all your other assets.
In addition, part of the probate process is to determine how much, if any, estate taxes are owed. To do this, the court needs to have an accurate value of your estate and your insurance policies are included in that value.
The only time this doesn’t hold true is if you are not the owner of the policy.
Of course, there are ways to exclude your life insurance from both probate and estate taxes, one of which is an Irrevocable Life Insurance Trust (ILIT).
To learn more about this important strategy of avoiding probate and minimizing estate taxes on your life insurance, contact our office today.
Attorney at Law
Latest posts by Larry Parman, Attorney at Law (see all)
- Why Crowdfunding May Cost You Medicaid Eligibility - July 16, 2019
- Beneficiary Designations, etc., Aren’t a True Substitute for a Trust - July 11, 2019
- Does a Trustee Get Paid? - July 9, 2019