How can life insurance impact the probate process?
On Behalf of Brothers & Henderson, P.S. Feb 19, 2025 | Probate |
Life insurance significantly affects probate proceedings. Understanding how policies work helps you plan effectively and avoid unnecessary delays. Whether a policy goes through probate depends on key factors like beneficiaries, estate debts, and policy ownership.
Does life insurance go through probate?
Life insurance typically bypasses probate if a valid beneficiary exists. When a policyholder dies, the insurance company pays the death benefit directly to the designated person. This allows beneficiaries to receive funds quickly without waiting for probate to conclude. However, if no beneficiary exists or the named individual has died, the payout becomes part of the estate and undergoes probate.
How estate debts impact life insurance
In Washington, life insurance proceeds generally do not cover estate debts if a beneficiary exists. However, if the policy becomes part of the estate due to a lack of beneficiaries, creditors may claim those funds. This delays distributions to heirs and reduces the overall inheritance. Naming a living person, rather than the estate, helps protect life insurance funds from creditors.
The role of policy ownership
Who owns the life insurance policy also affects probate. If the deceased owned the policy, it becomes part of the estate for tax purposes, even if it avoids probate. Transferring ownership to a trust before death shields the policy from estate taxes and probate. Setting up an irrevocable life insurance trust (ILIT) keeps proceeds separate from the estate.
How Washington law affects life insurance in probate
Washington law provides clear rules for life insurance payouts. State statutes prioritize named beneficiaries over estate claims, but probate still applies if no valid designation exists. Planning ahead by keeping beneficiaries updated and considering a trust prevents complications.
