If you have life insurance, you’ve probably purchased it with the idea that it will go to support your family after you pass away, not to pay your debts. I have some good news for you – in most cases, the life insurance will pass to your family members and will not be subject to the claims of creditors.
Typically, if you make life insurance proceeds payable to your spouse or your children, that money passes outside of your estate directly to your spouse or your children. Since it doesn’t become a part of your estate, it doesn’t become subject to the claims of creditors. Although many of my clients are debt free and aren’t worried about creditors, it’s possible that some creditors could surface after your death. For instance, if you died in a car wreck that was your fault and injured others, the other injured parties could make a claim against your estate, and any assets in your estate would be subject to the claims of creditors.
For those reasons, I usually recommend that my clients make their life insurance proceeds payable directly to an individual, or a trust for the benefit of their children. If they do that, the money will pass directly to their loved ones. It’s always a good idea to keep those beneficiary forms up to date, so I recommend that my clients update those forms as a part of the estate planning process.
Do you have any questions about life insurance proceeds and debts in Georgia? Call Sarah White, Marietta wills attorney, at 678-453-6490. I’ll be happy to provide you with a free phone consultation.
As part of the estate planning process, I always strongly encourage my clients to update their beneficiary forms. This includes forms for life insurance policies, IRA’s, 401(k)s, and anything other accounts that have a POD (pay on death) form. Sometimes, my clients are shocked to discover that the forms were completed when they were single or married to another spouse, and they simply didn’t realize they needed to be changed. Or the beneficiaries were parents who have passed away or other relatives from which they may now be estranged. For many clients, I recommend naming the spouse as the primary beneficiary, and the children (either individually or a trust for the children’s benefit) as a secondary beneficiary. There are some occasions where I may recommend that the estate be named.
Unfortunately, if the forms leave the money to the wrong party, it can be almost impossible to get the funds back. That’s why it is so important to review not only your estate plan every couple of years (or after a major life event), but also as a part of that process, review the beneficiary forms. The few minutes of your time it will take to review those are well worth the peace of mind you will have in knowing that upon your passing, your assets go to whom you want them to go to.
Does your estate plan need updated? If you need a review of your documents, call Marietta estate planning attorney Sarah White at 678-453-6490 to learn the steps you need to take. Call today.