No one grieving the loss of a loved one wants to have to think about money or the financial impact of the loss. Life insurance is one way people protect their families financially in the event of their death. These policies can be crucial, especially if the person who died was the main breadwinner for a family or if the death was sudden. Fortunately, life insurance doesn’t go through probate – the legal process that distributes assets and makes familial decisions after a person dies. The policy payout goes directly to the beneficiary.
However, if there are questions about this policy, the beneficiary, or its legality, you’ll need the help of an estate planning lawyer. An accomplished California probate attorney from Sweeney Probate Law can work with your loved ones after your death to make sure that they receive the compensation they need.
Life Insurance Benefits in California
A lot of people want to make sure that, if they die unexpectedly, their family is protected and stable. Establishing a life insurance policy is one way to give your family extra protection if you die suddenly.
When you create a life insurance policy, you are making an agreement with the insurance company. You pay them a certain amount of money on a regular basis, usually each month. In exchange, they agree to pay a single amount to anyone that you choose when you die. The people you choose to receive the payout from your policy are called beneficiaries. If your policy is correct and up to date when you die, then the full amount of your policy will be paid directly to your beneficiaries.
Life insurance is supposed to help your loved ones with financial struggles when you die, so it is important that they get the full payout. In most cases, your life insurance policy is not taxed, and your beneficiaries will receive a lump sum. There are some circ*mstances, though, when a life insurance policy must go through probate and not directly to your beneficiaries.
Probate in California
When someone dies without a will, it is up to the courts to decide how their property will be divided. This process is called a probate court case. The first thing that happens in a probate case is that one person is chosen to be the personal representative of the deceased. This person is in charge of making sure that all of the deceased individual’s property, called their estate, is divided fairly.
The personal representative will work with the courts to determine how much the estate is worth. This will include looking at personal and private property, real estate, stocks, and more. Any property that is not specifically given to a loved one could be used to pay off debts and is usually subject to taxes. One thing that is usually not included in probate is life insurance, but that is not always the case.
Life Insurance and Probate in California
One reason why a life insurance policy is beneficial is because it is not taxed. That means that your loved ones will get the full amount of your policy when you die. If your policy is up to date when you die, then it will not be taxed or have to go through probate court. An up-to-date policy is paid regularly and names beneficiaries who are alive and can be contacted easily. When your life insurance is not current, then it will be included in your estate. That means it will go through probate and be used to pay off debts before it is paid out.
FAQs
Q: How Is Life Insurance Paid Out After Death?
A: Many people pay into a life insurance policy to make sure that their family does not face extra debt or struggles when they die. These policies can help pay off debts, cover any funeral or burial costs, and keep a family financially stable while they adjust. In most cases, a life insurance policy will be paid directly to the beneficiaries when the policyholder dies. This only happens when a life insurance policy is up to date and names a current beneficiary.
Q: Is Life Insurance Considered Part of the Deceased’s Estate?
A: Determining what assets and property are part of an estate can be a hard process. Anything that is not included in a will, a trust, or an established estate plan might have to go through the probate courts to be divided. Life insurance policies are considered part of an individual’s estate, but they usually do not have to go through probate unless they are not up to date.
Q: Does Life Insurance Have to Be Used to Pay the Deceased’s Debts?
A: Life insurance policies are intended to take some of the financial burden off loved ones after you die. For many people, this means that they can afford a funeral or pay off any debts that the deceased has. Paying off debt is not a requirement, though. Whoever is named a beneficiary will usually get one payout that is not taxed. Once they receive the money, they can use it however they want.
Q: What Happens When a Life Insurance Policy Goes to an Estate?
A: Any assets or property that an individual owns when they die will be included in their estate. This could include real estate, stocks, retirement, and life insurance policies. If the life insurance policy is up to date and includes a beneficiary, then it will be paid directly to that person. When there is a policy that does not have a correct or current beneficiary, it will be part of the estate and may have to go through probate. When a life insurance policy goes through probate with the estate, it will be used to pay debts, and anything left over will be given to the beneficiary the courts choose.
Contact Sweeney Probate Law
Life insurance could be a literal lifeline to a family after a person dies. Such a policy might be used to cover any costs for a funeral or burial, pay off any debts of the deceased, or help a family stay financially stable. Keeping your insurance policy up to date helps to make sure that your family gets all the money from your policy and does not lose any in probate.
The team at Sweeney Probate Law has forty years of experience to help your loved ones navigate the probate process and receive the benefits they need.
