One way many estates ensure that there is enough liquid cash on hand is through life insurance. Cash can be used to pay estate taxes, give children the resources to manage the property they inherit, give a business partner the ability to buy out the estate’s interest in a business, or to provide for children or disabled individuals. Life insurance passes outside of the estate directly to the beneficiary of the policy so the cash is quickly available while other assets are still processing through probate.
Naming Your Beneficiaries
For many, the first time they purchase life insurance is when they have children and the other spouse is the primary beneficiary of the policy. Therefore, if one spouse dies, the other has the resources to pay off the mortgage, send the children to school, or simply live comfortably without having to worry. The secondary beneficiary, where the money will go if both spouses die simultaneously, is a topic you’ll want to discuss with your estate planning attorney. You’ve probably designated an individual in your estate to be responsible for the children in this event and you may want to make them the secondary beneficiary. However, there are other ways to structure the finances as some parents want life insurance funds held until their children reach their majority. Consider the beneficiaries of the policy carefully as they are who the payout with go to directly upon your death and others cannot challenge this in probate court.
Collecting Life Insurance Premiums
Hopefully, your estate is neatly organized and a copy of your life insurance policies and contact information, and even your agent’s contact information, is readily accessible to your heirs. They will want to contact the agent or the insurance company as soon as possible to inform them of the death. This will trigger the claims process and the payout.
If you’re unsure whether someone had a life insurance policy, the best place to start looking is their employers. Human resources professionals keep records on plan beneficiaries and what plans were in effect when they were employed.
Once the life insurance company receives notification of the death, they begin the claims process. The agent or your estate lawyer can help you work through this process, gathering the necessary documents and communicating with the insurance company to move the process along, especially if the insurance company tries to deny benefits. While most life insurance pays within a month or two of the date of claim, it can take longer it the policy was purchased within the last two years or if the company initially denies the claim.
At Dunn Law Firm, we want to make sure your estate plan is comprehensive and includes life insurance and instructions. We will advise you on how best to structure your estate to meet your goals and if we handle the probate, we will help your loved ones navigate life insurance and collect their premiums. To learn more, reach out to the Dunn Law Firm by calling (435) 628-5405 to set up a free consultation today.