Protect Your Life Insurance from Creditors
Contributor: Maria L. Shinn
Will your Life Insurance Policy be a part of your probate estate after you pass away? Yes, it will, if you do not add a beneficiary or if you name your estate as the beneficiary of your policy. If there is no named beneficiary, or your estate is named as the beneficiary, your life insurance proceeds are subject to your Will in terms of money division and paying your bills.
Your creditors may be able to claim your life insurance proceeds if the proceeds are part of your probate estate. The amount of life insurance proceeds that beneficiaries actually receive could also be reduced by administrative costs, court fees, executor fees, attorney fees, etc. Finally, what's left of your life insurance will be divided according to the terms of your Will. If you don't have a Will, the probate court will follow Ohio law* and distribute your life insurance to your next of kin, regardless of whether you'd want someone else to receive that money.
The best course of action is usually avoiding probate with your life insurance. If you have a Trust, you should designate the Trust as the beneficiary. When you pass away, your Successor Trustee will be in charge of distributing the life insurance proceeds according to the terms of your Trust. If you don't have a Trust, you should consider naming a beneficiary and a contingent beneficiary for your life insurance policy. That way, the life insurance company will pay the proceeds directly to your beneficiary after your death, and probate will be avoided.
Maria can help you protect your assets and avoid probate by creating an estate plan specifically designed for you. Contact her today to get started!
*Ohio's Statute of Descent and Distribution (ORC 2105.06)