Should a Will List Life Insurance Policy Information?

By Jeffry Olson, J.D.

Should a Will List Life Insurance Policy Information?

By Jeffry Olson, J.D.

Life insurance policies name a beneficiary and, upon the death of the insured, that beneficiary receives the death benefit for the policy. This occurs apart from the probate process where the assets of the deceased's estate are settled. It also frequently occurs much more quickly than the court overseen probate process. However, it is possible to list life insurance policy information in a will.

Older man and older woman sitting in business wear across from woman in suit

Why to List Life Insurance Policy Information in a Will

A life insurance policy is a contract, naming the beneficiary of the contract who collects the death benefit upon the death of the insured. Because these benefits pass to the beneficiaries outside the probate process, a life insurance policy is sometimes referred to as a nonprobate asset. However, listing life insurance policy information in a will provides potential life insurance beneficiaries with the necessary information to collect the life insurance policy. Life insurance beneficiaries are not always aware of the policy's existence, so listing it in the will ensures the policy is not overlooked. It is possible to include this information when writing or amending a will with assistance from an attorney or an online legal service provider.

Naming the Estate as the Life Insurance Beneficiary

It is possible to name the estate of the deceased as the beneficiary of a life insurance policy. In this case, listing the life insurance policy information in the will is reasonable. However, no benefit is gained by naming the estate the beneficiary of a life insurance policy. Further, there are multiple reasons to avoid naming the estate the beneficiary of a life insurance policy.

Before distributing the proceeds of the estate, the estate must go through the probate process. As with any court process, probate takes time. Even the fastest probate process takes longer than the distribution of the proceeds of a life insurance policy.

Naming the estate as the beneficiary of a life insurance policy makes the proceeds of the policy part of the probate estate. Prior to distribution of the proceeds of the estate to the beneficiaries, all debts of the estate must be paid. Those debts are paid out of the proceeds of the estate, including the proceeds of the life insurance policy when the estate is its beneficiary.

In general, the beneficiary does not report life insurance payments as gross income, and these payments not subject to taxes. However, an estate may be subject to estate tax if the value exceeds state or federal exemption limits. As a result, life insurance proceeds could become subject to estate tax if the estate is the beneficiary of a life insurance policy.

Wills and Life Insurance Policy Information

Include life insurance policy information in a will if the goal is to provide information to the beneficiary of the policy. Listing a life insurance policy in a will has no impact on either the policy or the will. For example, a will cannot change the beneficiary of a life insurance policy because the beneficiary is determined by the terms of the policy. While it is possible to name the deceased's estate the beneficiary of a life insurance policy, it is rarely advisable. Nothing is gained by doing so and it may put the proceeds of the policy at risk to creditors, including the government.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.