Is Life Insurance Part of an Estate?

Is life insurance included in an estate?

Dealing with the affairs of an estate leads to a variety of questions. A common question is whether or not life insurance is considered part of an estate. There are situations in which life insurance is part of an estate and other instances when it is not.

Misconceptions

On the one hand, there are people who assume life insurance is never a part of an estate. On the other hand, some individuals conclude life insurance always is included in an estate.

Considerations

If a life insurance policy of a deceased person names her estate as the beneficiary, the proceeds are part of the estate. Some people take this approach to make money available to pay funeral expenses.

Other Beneficiary

If the life insurance policy establishes another person as the beneficiary, the proceeds are not included in the estate.

Benefits

By bypassing the estate, the proceeds from a life insurance policy are not subject to tax liability.

Warning

If the beneficiary named in the life insurance policy is deceased and no substitute beneficiary is named, the proceeds from the life insurance go to the estate.

References

• "Executor's Guide: Settling a Loved One's Estate or Trust"; Mary Randolph; 2008
• "Wills, Probate and Inheritance Tax For Dummies"; Julian Knight; 2008
• "8 Ways to Avoid Probate"; Mary Randolph; 2008

Resources

• Penn Law: Uniform Probate Code
• Cornell University Law School: Uniform Probate Code--State by State Locator