Are Life Insurance Benefits Subject to Probate in California?

By Jeffry Olson, J.D.

Are Life Insurance Benefits Subject to Probate in California?

By Jeffry Olson, J.D.

Life insurance benefits are not subject to probate in California or any other state. When a person dies, the court process makes sure the deceased's valid debts are paid and any remaining assets are distributed under the supervision of the court. Not all assets of the deceased are probate assets. Life insurance benefits, for example, generally pass outside the scope of it because they have a named beneficiary. However, under some circumstances, they can be subject to probate.

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Naming an Individual or Trust as the Beneficiary

When a life insurance policy has a named beneficiary and that beneficiary survives the insured, the named beneficiary receives the proceeds directly without the need for the probate process. Using named beneficiaries in life insurance policies is one of the most common methods for passing assets outside of the court process.

An individual may also name a trust as the beneficiary of the policy. When the insured passes away, the proceeds are distributed to the trust. These proceeds are not subject to this process, instead, the proceeds of the policy are distributed according to the terms of the trust.

Naming an Estate as the Beneficiary

In some cases, the insured names their estate as the beneficiary of life insurance proceeds. In that case, the proceeds of the policy are paid to the insured's estate. The money received by the estate from the life insurance policy is then subject to probate.

Naming the insured's estate as the beneficiary of a life insurance policy negates one of the primary benefits of using a policy to pass on wealth because its benefits become subject to probate after being incorporated into the estate's assets.

If a named beneficiary passes away prior to the insured, the life insurance proceeds pass to the contingent beneficiary. However, if the policy names no surviving contingent beneficiary, the proceeds of the policy are then paid to the estate of the insured. As discussed above, the proceeds of the life insurance policy would then be subject to probate.

Life Insurance Policies and Probate in the State of California

With proper planning, it is possible to avoid probate of proceeds from life insurance policies. Specifically, naming an individual that survives the deceased allows avoidance of this process. However, if this is not done, the proceeds of the policy become subject to probate by passing to the insured's estate. In that case, the terms of the insured's will or California law if the insured does not have a will determines who inherits the proceeds.

Life insurance details are challenging to understand, especially because the laws vary from state to state. If you are unsure about life insurance benefits and beneficiaries, you may want to hire a California-licensed estate planning attorney.

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