Wednesday, June 15, 2022

Do You Need Probate For Life Insurance

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When Is Probate Required

I have life insurance. Do I need a Will & Trust to avoid probate?

Probate is necessary for most aspects of estate administration. Probate will normally be required in the following circumstances:

  • For distributing the property and assets among beneficiaries where it was owned solely by the person who died.
  • Where any part of estate administration is disputed, and there are legal proceedings.
  • Where the person owned stocks or shares in their sole name.
  • Where the amount of money in financial services is over the probate threshold, which could be anywhere between £5000 and £50,000.

If you find that it is required then there are a number of probate specialists and solicitors that can help you.

Ways To Transfer Assets Without Probate

Planning ahead and transferring your property and assets to your heirs and named beneficiaries without going through probate court will save your loved ones uncertainty, stress, lengthy wait times, and costly probate fees.

The following are some of the most common ways to transfer assets directly and avoid probate:

What Happens When Probate Has Been Granted

Once youve received confirmation that you can lawfully manage the deceaseds estate, there are a number of steps you may wish to take:

  • Oversee the sale of any probate property, if youre keen to sell.
  • Make a life insurance claim .
  • Send any copies of the Grant of Probate or Letters of Administration to the deceased persons asset holders, such as their bank, building society or insurance company.
  • Close any bank accounts that remain open once youve recovered the funds.
  • Pay any outstanding tax bills, excluding the IHT liability that would have already been paid, and debts.
  • Distribute money and assets to the beneficiaries in accordance with the will.

Managing the financial affairs of a loved one can be a challenging process, but its important to get the probate process right so that you can enact their wishes faithfully. Read more about your responsibilities as an executor of a will.

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Basic Estate Planning: Life Insurance

Life insurance is a contract, similar to property ownership with rights of survivorship. Upon the death of the insured, a beneficiary receives a cash payment. Life insurance can be very useful in estate settlement. Life insurance is a contract between as many as four entities:

  • Life insurance company
  • Insured
  • Beneficiary
  • The first entity, the company, accepts money from the second entity, the policy owner. The policy owner determines who is insured. The owner of the policy has the authority to cancel the policy, borrow against the policy, and determine and change the beneficiary. When the insured dies, a cash award is made to the beneficiary, the fourth entity.

    The primary reason for a death benefit is to care for dependents who would have been cared for if the deceased were still alive. In general, however, most of us need life insurance when we are least able to afford it, when debt is high, when assets are low, and when our children are too young to care for themselves. This is when life insurance can create an estate in the event of the death of the breadwinner/caretaker. For most, life insurance is the only way to provide security for our loved ones in the event of our death.

    This concludes the discussion of life insurance. The next fact sheet will discuss the use of trusts as an estate planning and managing tool.

    How Much Does Getting Probate Cost

    Do You Need Probate For Life Insurance

    While every probate specialist will charge different fees, you can expect to pay thousands of pounds if you use a professional, whereas it may cost you a few hundred pounds to do it yourself. The exact costs will depend on the size and complexity of the estate if the value is greater than £5,000, the cost of applying for probate is £215. There is no fee if the value is below that amount, and there is a £1.50 charge for each copy of the Grant of Probate itself. The probate process can be expensive, but getting the job done professionally could save you hassle in the long-run.

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    Make Property Jointly Owned

    There are multiple ways to pass real estate to another person without probate by making the property jointly owned.

    Avoiding probate with joint ownership

    Several forms of joint ownership provide an easy means of avoiding probate when the first owner dies. Many couples hold title to all of their significant assets as joint owners.

    Usually, no additional documents are needed to take title to a property as joint owners. You simply state on your real estate deed, for example, how you want to hold title.

    Jointly owned assets that transfer to the surviving owner do not go through probate. This is often referred to as joint ownership with right of survivorship.

    Another form of joint ownership for married couples is tenancy by the entirety, recognized by about half of the states. This is a way for spouses to equally hold 100% interest in a property. With this form of joint ownership, the surviving spouse has ownership rights, which keeps the property out of probate.

    Avoiding probate with joint tenancy

    Property owned in joint tenancy avoids probate because it automatically passes to the surviving owner when one owner dies. Usually, a simple checkmark is all that is needed to designate this type of ownership. After your death, the surviving joint tenant will automatically own the property.

    Do I Need A Will Or A Trust

    Nearly everyone can benefit from making a will, and some people may need a trust, too. Atrust can provide more security leaving something behind for your loved ones since it’s a separate entity that holds assets and passes them along according to your wishes. You may need to trust to hold property on behalf of your minor child until they come of age to inherit the assets.

    A will and living trust can even work together: you can make a will pour over any remaining assets you might have forgotten to transfer into your trust upon your death.

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    Learn What Your Life Insurance Options With Doane & Doane

    The professionals at Doane & Doane can help answer the question, Does life insurance have to go through probate? and many more probate questions. Founded in 2003 by husband and wife legal team, Randell C. Doane and Rebecca G. Doane, Doane & Doane provides legal and financial services to families, individuals, and businesses throughout Southeast Florida.

    Estate planning is about much more than just giving away property. It is an act of love and kindness, with the ultimate goal of providing for the future financial security of your loved one. At Doane & Doane, our tax and estate professionals help people plan for retirement, consider various types of wills and trusts, make provisions for loved ones, figure out future child support, and minimize tax liability. Experienced wills and trusts attorneys know which tools to use to get the best results for their clients. Our lawyers can help you determine which tools are best suited to your specific circumstances.

    Since the day we opened our doors, we have worked hard to earn a reputation as one of the regions most prominent tax and estate planning law firms in Palm Beach County, Florida. Our dynamic team includes the firms founding partners, experienced associate attorneys, and an outstanding team of paralegals, legal assistants, and support

    Call the Palm Beach County lawyers at Doane & Doane, P.A. You can reach us at . Call us today.

    Life Insurance And Probate

    Do Your Life Insurance Proceeds Go Through Probate?

    Generally, life insurance does not have to go through the probate process. Typically, the benefits of a life insurance policy will be given directly to the beneficiary that is named on the policy without having to go through probate. However, there are situations that would require a life insurance policy to go through probate. If that happens, the payments loved ones receive can be significantly delayed. It can also drastically reduce the amount of the payout that they were supposed to receive.

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    Claiming A Life Insurance Benefit

    While the probate process can be long and time-consuming, filing a claim for the death benefit from a life insurance policy is generally relatively straightforward. The designated beneficiary must contact the insurance company and will likely need a certified copy of the death certificate.

    Once the claim is approved, the insurance company will cut a check directly to the beneficiary.

    If youre going through the probate process with or without a life insurance policy you can save money by doing it yourself. And we can help. Get ready-to-sign forms and simple instructions in minutes.

    Do I Need To Apply For Probate If There Is A Will

    Even in cases with wills, most of the time you will still need to apply for probate if there is a will.

    The only difference is that you will be applying for a grant of probate, rather than letters of administration. There are some legal restrictions on who can apply for letters of administration, but otherwise, the process is mostly the same.

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    Would Life Insurance Ever Go Through Probate

    Yes. There are two specific scenarios when a life insurance policy will go through the probate process.

    1. Beneficiary pre-deceases the policyholder. If the beneficiary of a life insurance policy dies before the insured dies. Then, when the insured ultimately passes, the life insurance proceeds will be paid out to the insureds estate .

    2. Life insurance payable to insureds estate. There are circumstances when it might make sense to have a life insurance policy be made payable to the estate of the insured. Accordingly, if you take out a life insurance policy, and you make it payable to your estate, then when you pass away, the life insurance contract will operate as instructed, and the life insurance money will go into your estate.

    Why Would You Want To Avoid Probate

    Do You Need Probate For Life Insurance

    The probate process is usually not simple or efficient. Validating a will in court and transferring assets can be a lengthy process the length of time usually depends on the size of the estate and how quickly the estate executor can obtain a death certificate and petition the court.

    According to the American Bar Association, even an average estate takes between six and nine months for all assets to be distributed to rightful heirs at a cost of about $1,500 in probate fees.

    If you plan ahead, however, there are various ways to avoid the probate court system and transfer assets to beneficiaries directly without waiting for a will to be verified.

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    If Decedent Failed To Complete A Beneficiary Designation Form

    The same rules apply if the decedent failed to complete a beneficiary designation form before their death. Either the insurance proceeds will pass into the decedent’s probate estate and be available for paying the decedent’s final bills, or the proceeds will pass directly to their heirs-at-law, safe from creditors.

    How To Minimize Or Avoid Probate In Ontario

    There are several ways to minimize or avoid probate. It should be noted that each of these methods has benefits and disadvantages and should not be used without obtaining legal or tax advice. In many circumstances, although it may seem counterintuitive, it makes more sense from a logistic or tax perspective to pay the probate fees rather than trying to minimize them.

    Several legal tools that may be helpful in maximizing your estate include:

    • Joint tenancies
    • Succession planning for business assets and corporate shares
    • Gifts

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    How Long Does Probate Take

    The answer to the question of how long does probate take varies from state to state and according to the surrounding circumstances. For example, in New South Wales, the Supreme Court website states that the court takes up to 20 days to process an application. Complex applications may need additional time to be considered.

    Some issues that might cause delays include having only a copy of the will or having a will thats been damaged in some way. If you have a will in your keeping, then its vital to look after it carefully, and to avoid making any modifications to it whatsoever, including marks, tears or staples.

    Social Security Benefits: One

    Why You Need a Life Insurance Beneficiary | Bankers Life

    The Social Security death benefit is relatively easy for surviving family members to claim and quick to be paid, but it is currently a small lump-sum payment of $255 . The surviving spouse or dependent children can claim this benefit. This payment is in addition to ongoing survivors benefits to which the spouse or children may be entitled.

    Go to the local Social Security office to claim benefits. The staff can help with the paperwork and explain what information and documents — a certified copy of the death certificate, for example — are needed. To find the closest office, check the government listings in the phone book, use the “How to Find Your Local Office” service at www.ssa.gov, or call the SSA, toll-free, at 800-772-1213.

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    Different Rules Apply To Estate Taxes

    These rules address debts in the deceased’s sole name at the time of their death, as well as personal tax debts, but they do not apply to estate taxes that may be due if the value of their estate is significant. A hefty life insurance policy payable to their estate might increase its value above the federal exemption amount so that an estate tax would be due. In this case, the proceeds are subject to taxation if the decedent personally owned the policy at the time of their death, or if he transferred ownership of the policy to someone else within three years of their death.

    When Is Probate Not Necessary

    There are some situations where you will not need probate. These include:

    • When the person owns their property and assets joint with another person, probate will not be needed. This is because the assets will be passed directly onto the other person who owns the property. This is most common where a husband and wife, or partner, are the joint owner of the family home. When one owner dies, you should provide the death certificate to HM Land Registry so the legal rights to the home can reflect this change. It is important to note that a joint tenancy and tenancy in common are different.
    • For a small estate, many banks will not require a grant of probate to access the money. This is generally if the person had less than £5000 in their personal accounts. This is only really the case where the person had no land, property, or shares.
    • If the person was insolvent. Therefore they had more debt, tax, and other expenses to pay than they actually had.
    • Where there is an insurance policy in the form of a trust. In this case, the trustees must produce a copy of the policy and the death certificate. Then, the insurance services will pay the trustees of the estate, who old the money for the beneficiaries.

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    Is The Beneficiary Of Life Insurance Responsible For Debt Can Life Insurance Proceeds Be Taken By Creditors

    No, and this is one of the reasons going through probate is disadvantageous even if the estate value ends up being distributed appropriately.

    If the insured was in debt at the time of death, their estate will first be used to pay off any outstanding debts. When the remains of the estate is distributed to the insureds heirs, those proceeds may be subject to estate taxes. In contrast, if a beneficiary receives the insureds death benefit directly from the insurance company, the beneficiary will receive the full amount without debt collection or tax collection.

    Many states exempt a specified amount of life insurance death benefits from debt and/or tax collection even after the death benefits are transferred to the insureds estate, but this depends on the laws in your state.

    What Happens When Life Insurance Goes To The Estate

    Does Life Insurance Go Through Probate?

    When there is no beneficiary on a life insurance policy, the life insurance beneficiary rules dictate that the death benefit will be subject to the probate process.

    Probate refers to the process by which a deceased individuals estate is distributed. The executor uses the deceaseds will to determine who are the beneficiaries entitled to a portion of the insureds estate. If the deceased had no will, the estate is distributed according to the states laws of intestacy.

    Unlike the process of claiming the death benefit as a beneficiary, which is streamlined and private, the probate process varies greatly state-to-state basis and is a matter of public record. And especially in the case of high-value estates, probate can be a heavily-litigated process, with multiple parties claiming conflicting amounts of the deceaseds assets.

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    Do Life Insurance Proceeds Go Through Probate

    If youre worried about your property getting stuck in probate after you die, you might be wondering what happens with your life insurance policy. Does life insurance need to go through probate? The good news is that payouts from life insurance policies rarely go through the probate process. As long as your policys beneficiary designations are all squared away, you can usually cross life insurance off of your list of concerns.

    However, if you might owe estate taxes, or if its possible that your beneficiaries might not survive you, then some additional planning might be in order to make sure that your life insurance policy doesnt cause your estate extra expense in probate.

    Do I Need A Will If I Have No Kids

    Your beneficiaries can be anyone you want â not just your children â so people who do not have children still need a will to give away assets to spouses, partners, friends, and other loved ones. You can leave something to a charity or organization, too.

    A will also lets you name someone to settle your affairs â called an executor â so you need a will regardless of your family situation to appoint one. The executor’s most basic duties involve executing the terms of your will and distributing the assets to your chosen beneficiaries, but they also settle your debts and file for probate when necessary.

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