Can life insurance be forced to go to pay debts if there are named be beneficiaries?

Question

My dad passed away in Nov. He had named beneficiaries on his life insurance at work. He has way more debt than assets, he will have a negative estate. Creditors are threatening that we should use the life insurance to pay the balances...are these just tactics they use? Should we be concerned that the money can somehow be taken? We live in Wisconsin. Thanks!

Answer 1

if your father has named a specific person (or persons), the insurance will pay the proceeds directy to him/her/them.  if there was not a beneficiary named, then it would be paid to his estate, which may then in turn be used to pay his debts.  you will want to contact his HR department or if he received an actual policy, review that to determine who was listed as the beneficiary.

Answer 2

Life Insurance benefits usually pass to the heirs "non-probate". And they won't be used to pay the decedents bills.

However...Talk to an estate planning attorney...about your specific case and have him / her contact the creditors to get them off of your back.. Sorry for your loss. Good luck.

Answer 3

Life insurance isn't part of the estate and you do not have to use it to pay your father's debts.  

You will find that some credit card companies will say anything to get a family member to pay the bill.  It's best not to talk to these people on the phone at all.  Send them a letter with a copy of your father's death certificate.  Tell them that it appears there to be a negative estate.  Insist that they stop calling and only contact by writing.

Answer 4

Life insurance is unique in that the death benefit, not the cash value always, usually free from debtors! UNLESS the policy has been assigned over to them or the beneficiary is them. The policy is unique, even with an estate plan, unless specificaly mentioned and beneficaries are changed will be paid only to the named beneficiary! This is generally true and is true in the Commonwealth of Penna.

Your father, my sympathy for your loss,  had generally term insurance (no cash value) through work. Probally was not assigned because there is no cash value and the beneficary, if he listed one, is not a debtor. Call his HR or benefits department if you are the beneficiary, or the spouse or child or

executor (trix) and they will tell you only if you are beneficiary, but if not,  they will not tell who is. I would contact your dad's place of employment first, then if necessary your State Insurance Commission, for an explanation (no charges). Then keep a log of these tactics and report to the Better Business Bureau, or if they are harassing your family, your attorney!

The only way, unless they are listed or assigned is if, your dad left no beneficiary. Then generally, it will go to the estate and after any taxation (the estate) then becomes part of the estate and is to be paid to creditors.

PLEASE NOTE.

These are general answers and info. I live in another state and each state has their own laws!

The State not the Federal gov't makes the laws here. So again, contact employer, the State insurance Commission--or reverse order, if you wish.

Answer 5

No.  Life insurance proceeds are paid directly to the named beneficiaries.

Answer 6

Typically life insurance proceeds pass outside of the estate.  You should not have to use that money to settle his debts.

Answer 7

I will give you a short answer to your question.  I called my Life and Health Agent and asked him this very question for you.  The answer is no.  He told me that insurance companies have spent millions to lobby for this very issue over the years.  Not even the IRS can come after a life insurance benefit prior to distribution of the benefit.  Once you have it in a bank account the IRS can seize it for back taxes.  Of course the insurance companies have a quick and easy answer to that.  Put the proceeds into an annuity upon distribution.