Question : Can life insurance be forced to go to pay debts if there are named be beneficiaries?
My dad passed away in Nov. He had named beneficiaries on his life insurance at work. He has way more debt than assets, he will have a negative estate. Creditors are threatening that we should use the life insurance to pay the balances...are these just tactics they use? Should we be concerned that the money can somehow be taken? We live in Wisconsin. Thanks!
- asked by Jennifer J
All Answers:
Answer #1
Typically life insurance proceeds pass outside ofthe estate. You should not have to use that moneyto settle his debts.
- answered by Steve I
Answer #2
Life insurance isn't part of the estate and you donot have to use it to pay your father's debts. You will find that some credit card companies willsay anything to get a family member to pay thebill. It's best not to talk to these people onthe phone at all. Send them a letter with a copyof your father's death certificate. Tell themthat it appears there to be a negative estate. Insist that they stop calling and only contact bywriting.
- answered by bdancer222
Answer #3
Life Insurance benefits usually pass to the heirs"non-probate". And they won't be used to pay thedecedents bills. However...Talk to an estateplanning attorney...about your specific case andhave him / her contact the creditors to get themoff of your back.. Sorry for your loss. Good luck.
- answered by Owen
Answer #4
No. Life insurance proceeds are paid directly tothe named beneficiaries.
- answered by newjerseyguy
Answer #5
Life insurance is unique in that the deathbenefit, not the cash value always, usually freefrom debtors! UNLESS the policy has been assignedover to them or the beneficiary is them. Thepolicy is unique, even with an estate plan, unlessspecificaly mentioned and beneficaries are changedwill be paid only to the named beneficiary! Thisis generally true and is true in the Commonwealthof Penna.Your father, my sympathy for your loss, had generally term insurance (no cash value)through work. Probally was not assigned becausethere is no cash value and the beneficary, if helisted one, is not a debtor. Call his HR orbenefits department if you are the beneficiary, orthe spouse or child or executor (trix) and theywill tell you only if you are beneficiary, but ifnot, they will not tell who is. I would contactyour dad's place of employment first, then ifnecessary your State Insurance Commission, for anexplanation (no charges). Then keep a log of thesetactics and report to the Better Business Bureau,or if they are harassing your family, yourattorney! The only way, unless they are listed orassigned is if, your dad left no beneficiary. Thengenerally, it will go to the estate and after anytaxation (the estate) then becomes part of theestate and is to be paid to creditors.PLEASE NOTE.These are general answers and info. I live inanother state and each state has their ownlaws!The State not the Federal gov't makes thelaws here. So again, contact employer, the Stateinsurance Commission--or reverse order, if youwish.
- answered by bi66al
Answer #6
I will give you a short answer to your question. I called my Life and Health Agent and asked himthis very question for you. The answer is no. Hetold me that insurance companies have spentmillions to lobby for this very issue over theyears. Not even the IRS can come after a lifeinsurance benefit prior to distribution of thebenefit. Once you have it in a bank account theIRS can seize it for back taxes. Of course theinsurance companies have a quick and easy answerto that. Put the proceeds into an annuity upondistribution.
- answered by Ivanka F
Answer #7
if your father has named a specific person (orpersons), the insurance will pay the proceedsdirecty to him/her/them. if there was not abeneficiary named, then it would be paid to hisestate, which may then in turn be used to pay hisdebts. you will want to contact his HR departmentor if he received an actual policy, review that todetermine who was listed as the beneficiary.
- answered by Carrie
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