From Our “Ask a Question” mailbag: Life Insurance is a Non-Probate Asset, Unaffected by Your Will:
“My sister went to jail, so mother changed her Will and gave me the entire estate. My mom died this year a resident of Montgomery County, Pennsylvania. She forgot to remove my sister from her life insurance. Now I hear life insurance is a Non-Probate Asset. Who gets the life insurance?”
Probate vs. Nonprobate Estate.
Your mother’s Will can give you the entire “probate” estate. But, the Will does not affect the “non-probate” property. Let me explain.
Life Insurance typically names a beneficiary. The beneficiary receives the life insurance distribution because the insured designates the recipient on the insurance policy. The policy owner can change this beneficiary designation at any time. The beneficiary designation is part of the life insurance policy; unaffected by the policy holder’s Will. When the insured dies, the beneficiary can then collect the life insurance proceeds. This is true even if there is no Will.
The Will Controls Probate Assets. Life Insurance is a Non-Probate Asset.
The Will determines ownership of all assets owned by a deceased without beneficiary designations. These assets are called “probate” assets. Real estate, cars, and investment accounts are typically probate assets.
In your case, it sounds like your mother failed to change the beneficiary designation on her life insurance. She was the policy owner. She could have done this at any time. The Will may give you all her probate assets but will not affect the life insurance.
Your sister is entitled to the life insurance even if she is in jail. Collecting the insurance might prove difficult for her, but that is not your concern.
Taxes are another consideration. Your mother’s estate could be subject to death taxes, such as an Inheritance or Estate Taxes. If so, as executor you need to determine who is responsible for the tax due. It is possible that you will have to pay taxes on your portion of the estate.
As executor, you can retain an experienced probate lawyer to give you advice. If you need help on only a single item, rather than help on the entire estate, feel free to retain us. We are happy to help with as little or as much as you need.
Life Insurance is a Non-Probate Asset, Unaffected by Your Will:
In this Post, I tried to explain why Life Insurance is a Non-Probate Asset, Unaffected by Your Will. Let me know how I did, comments and questions are welcome!
If you have further questions about Estate Administration or Estate Planning, feel free to Contact our office for a free consultation.
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Author, Peter Klenk, Esq.