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.
Larry Parman
Attorney at Law
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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