Does a Life Insurance Payout Go through Probate?
As a general rule proceeds from a life insurance policy doe not have to go through probate because it is not considered to be a part of the decedent's estate. When a named beneficiary is designated in the policy, the life insurance proceeds is paid directly to the beneficiary upon the death of the policy owner. However, in some situations life insurance policies do not have a named beneficiary, the beneficiary listed is deceased or beneficiary is unable to be located in which case the policy must go through probate so that the court can determine who is legally entitle to the insurance proceeds.
What Happens When Insurance Proceeds have to Go Through Estate In Mississippi?
When insurance proceeds have to be probated the insurance company will issue a check paid to the order of the estate of descendant. At that point the chancery court will oversee the management of the funds — either for payment of taxes and debts, and for distribution to heirs. While some states exempt a portion of the life insurance benefit from debt or tax collection, in Mississippi debt is not exempt from insurance proceeds. Conversely, the funds in a life insurance policy that flows directly to a designated beneficiary are not available to creditors — a pretty good reason to make sure a policy doesn’t go through probate. So debts and taxes must be paid before assets are distributed to heirs. So if a life insurance policy goes through the probate process, it will be used first to pay any remaining debts or taxes before the remainder gets distributed to any intended beneficiary.
Because it can be very expensive and cumbersome to have to probate a life insurance policy, it is important to make sure that that an life insurance policy is up to date with correct listed beneficiary. But there are bigger reasons to keep that policy out of the probate process.