can beneficiary of life policy be forced to use proceeds to pay decedent’s debts?

UPDATED: Apr 24, 2017

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UPDATED: Apr 24, 2017Fact Checked

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Asked April 24, 2017

1 Answer


That is a good question. You do have a lot more options with your insurance policy. They can be used to pay off the deceased's debts. They do not have to be, though. It all depends on how the will is set up and what is considered to be liquid. Let us take a closer look.

The only part of the policy that is considered liquid is the estate. This is when the spouse is listed as the primary beneficiary. This can be a secured debt or an unsecured one. Those who do not make plans to secure the debt with the creditors, they can go after the estate.

The only way the insurance policy will be involved is when the estate is named as the beneficiary, not the deceased's spouse. Once this happens, creditors can go after this too.
You may want to avoid doing this. Creditors can go after anything that is labeled liquid" to secure anything that is owed to them.

Creditors have a limited amount of time they can go after this debt. This window is usually left up to the discretion of the state and your insurance policy. You may want to check with them to see where you stand.

Creditors can no longer go after your estate or insurance policy once this window closes. Once the window is shut the debt is considered to be "paid in full". There are no exceptions to this ruling.

There are a few exceptions to the ruling above. You and your deceased spouse may have been named "equal" in the ownership of the debt. You are responsible for what was not covered when this happens. This is one situation where the "avoidance of the death probate" will not work.

Speak with your insurance company and estate trustees to go over all your options. This way there are no surprises when your spouse does die.""

Answered April 24, 2017 by GWGLife

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