Question : Does life insurance have to be used to pay the deceased debts?
If I am the beneficiary of life insurance payment after someone dies, do I have to by law use that money to pay off the deceased debts? Or is this something that the bill collectors cannot touch at least legally? How would the creditors even know that there was a payout of life insurance? Anyway for them to know this? Can I get in trouble for not paying?
- asked by pc
All Answers:
Answer #1
I believe life insurance must go to cover thedebts of the deceased prior to being dispersed tothe beneficiary. That is part of the reason whyyou take out life insurance.
- answered by msi_cord
Answer #2
Unless you want to be stuck in court and paying itto lawyeres, YES
- answered by Moonshiner
Answer #3
No it isn't a law that you have to satisfy thedeceased debts with the Life insurance thats up toyou but what is the right thing to do would thedeceased have wanted you to pay off their debts
- answered by tap158
Answer #4
There are certain loans and debts that cancelledupon someone's death...like most federal studentloans. However, mortgages, auto-loans, and creditcards are often covered by either the deceased'sestate or the insurance policy prior to beingdispursed to the beneficiary. I suggest getting alawyer to aid in the paperwork and obligationsthat go along with being a beneficiary.
- answered by linzlou83
Answer #5
life insurance passes outside of probate . Itbelongs to the beneficiary, not the estate.Infact, any such insurance of beneficiaryentitlement, such as a 401K or retirement passesoutside of probate as the beneficiary is the legalowner, not the deceased.Again, if you don't KNOWthe answer, don't disservice the poster byanswering wrongly.And yes, I AM an attorney.
- answered by hexeliebe
Answer #6
yes, it is considered part of the estate and allassets available must be used to pay anyoutstanding debts owed before the remainder of theestate may be payed out.
- answered by Pobept K
Answer #7
The proceeds of Life Insurance is an asset of theestate with the beneficiary of the life insurancenormally the legal next of kin or theexecutor/executrix of the estate. Those peoplewould be legally bound to settle all debts of theestate and there are probate courts to make surethat you do that. Now, debtors have a specificamount of time to post claim to the estate withthe probate court, following the publication ofthe obituary. If they fail to file with thecourt, I'd say they would have a hard time goingafter the beneficiary outside of the probatecourt.
- answered by Jim
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