Are Life Insurance Proceeds Assets in Probate?
Normally life insurance proceeds go directly to the name beneficiaries and are not probate assets.
Unless payable to your own estate, death benefits payable under your life insurance policies are NOT estate assets, which means they do not go according to your Will and which sometimes means they go to the “wrong people.”
Money paid out on your life insurance policy when you die is not “your” money. It is the money of the insurance company which, under the policy, has a legal obligation to pay the named beneficiary. So that money is not part of your estate, and you cannot control who gets it through your Last Will. You control who gets it by the designation of beneficiary in your initial application, and you can change that beneficiary only by filling out and filing with the insurance company a “change of beneficiary” form provided by the company.
The only exception is when the insurance policy is payable to “your estate” or where, under many policies, the only named beneficiary dies before you. Without a beneficiary who outlives you, the life insurance funds will be estate assets, just like a bank account you owned.
This can lead to trouble in several types of cases. If the beneficiaries of your life insurance policy are not the same as the beneficiaries of your estate, that could result in a distribution you don’t want.
Also, sometimes after a divorce people fail to change the beneficiary of their life insurance policies. Fortunately, a recent change in Florida law means that, effective upon entry of the divorce judgment, such designations of the now-ex-spouse are no longer valid.
Whenever you have a major life change, such as divorce or a family member’s death, you should review your plans and beneficiary designation to be sure your estate goes to the “right people.”