In some cases, the proceeds of the life insurance policy go to the estate of probate. There, the estate uses the funds to cover bills and the remaining costs. Other times, life insurance income goes to the policyholder's living heirs. There are situations in which a will can change a beneficiary of life insurance.
If your life insurance beneficiaries die before you, including contingent beneficiaries, the insurance payment will go to your estate. In that case, your beneficiaries will receive the money according to the terms of their will. Consult your financial or estate planning advisor if you have questions. It's also a good idea to name a contingent beneficiary on your insurance policy if your primary beneficiary can't or doesn't want to accept payment.
A substantial life insurance policy payable to the estate of a deceased person could increase its value above the amount of the federal exemption, so that wealth tax would be owed. Once the life insurance company has verified your status as a rightful heir, it will issue you the death benefit payment. The insured person is the person whose life is insured and the beneficiaries are the people who will receive the death benefit if the insured dies. If at least one of the designated beneficiaries survives the decedent, the life insurance income goes directly to the beneficiary outside of the legalization of the estate.
In addition, sometimes, after a divorce, people don't change the beneficiary of their life insurance policies. Carefully consider fees, risks, expenses and investment objectives before purchasing variable life insurance. PAA and Progressive are not responsible for the choices of insurers or coverages, the policies issued, the claims, the content or operation of this website, or the way Pets Best and the insurers handle or use your information. The insurance company will ask you to complete a medical exam and answer questions about your health before issuing a policy.
It's important to note that life insurance policies aren't subject to income tax, so beneficiaries usually receive 100% of the payment. The owner of a life insurance policy has the right to change the beneficiaries at any time and can also cancel the policy at any time. Without a beneficiary who survives you, life insurance funds will be equity assets, just like a bank account you own. The only exception is when the insurance policy is paid to “your estate” or when, under many policies, the only named beneficiary dies before you.
Withdrawals of life insurance policies may be subject to fees, penalties and income taxes, depending on the specific life insurance policy and the policyholder's tax situation.