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Generally, life insurance proceeds will go directly to the designated beneficiaries in the policy and are not considered Florida probate assets.
The probate and estate attorneys at Farshchian Law, P.A. are often asked whether life insurance is required by law to go through or is subject to Florida probate. The answer is, in most cases, “no.” Life insurance is one of those assets that do not normally go through Florida probate. This is because of the life insurance policy names a beneficiary. As a result, upon the death of the insured, the life insurance proceeds are paid directly to the beneficiary, not to the estate.
Death benefits payable under your life insurance policy are not, under Florida law, considered estate assets, which means they will not be distributed according to your will –which sometimes means they will end up going to the wrong people.
The money that is paid out on your life insurance policy upon your death is technically not “your” money. It actually belongs to the insurance company which, under the life insurance policy, is legally obligated to pay the beneficiary named in it. For this reason, that money is not really part of your estate, and you cannot control who will receive it through your Last Will. You control who gets this money by designating a beneficiary in your initial life insurance application, and you can change that beneficiary only by filling with the insurance company a “change of beneficiary” form provided by them.
Although this is how life insurance proceeds are usually handled, there are some exceptions, as with most things in law. The main exception is when the insurance policy is payable directly to the decedent’s estate, which happens in cases where the decedent designated no beneficiary or the beneficiary named in the policy dies before the insured and a change of beneficiary was not requested on time. The majority of life insurance policies only pay the insurance money directly to the beneficiary if the beneficiary survives the person whose life was insured. If the beneficiary dies before the insured, the life insurance funds will be considered estate assets, just like any bank account owned by the decedent, and will be required by law to go through Florida probate.
This can lead to trouble in a wide variety of cases. For instance, if the beneficiaries named in a life insurance policy are not the same as the beneficiaries of the decedent’s estate, the result could be a distribution the decedent never intended and would not be happy with.
Take for example a situation where a life insurance policy names “Jane Doe” as the designated beneficiary. If Jane Doe dies before the person whose life is insured, then the life insurance funds will be paid to the next beneficiary, known as a contingent beneficiary, if there is one. If there is not a named contingent beneficiary, the policy generally provides that the funds will be paid to the insured’s estate and become probate assets. This is what happens when the beneficiary named in the policy dies and is not changed on time.
One of the lessons this example teaches us that it is indescribably important to make sure that any life insurance policy is up-to-date when it comes to the primary and contingent beneficiaries named in it. By doing this, life insurance funds will not be pulled into the Florida probate process, which means less time and money spent on dealing with this particular asset during probate.
Also, sometimes after a divorce, people forget to change the beneficiary named in their life insurance policies, which could lead to trouble upon death. Fortunately, a recent change in Florida law means that such designations of the ex-spouse are no longer valid after divorce.
The main conclusion that can be made from this is that whenever you have a major life change, such as a family member’s death or a divorce, you should make sure to review your life insurance plans and beneficiary designations in order to ensure that the funds go to the right people.
Contact Farshchian Law, P.A. for your Estate and Probate Needs
At Farshchian Law, P.A., our team of Probate Attorneys looks forward to helping you with your estate and probate needs all over the state of Florida. To get in touch with one of our experts, call us at (305) 901-5628 or send us an email to Probate@JFRealEstateLaw.com.