Do creditors have a right to recoup debt from a life insurance benefit when the “estate” is listed as a beneficiary rather than the child/spouse of the deceased?
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Do creditors have a right to recoup debt from a life insurance benefit when the “estate” is listed as a beneficiary rather than the child/spouse of the deceased?
Asked on November 11, 2012 under Estate Planning, Arkansas
Answers:
Catherine Blackburn / Blackburn Law Firm
Answered 12 years ago | Contributor
I am afraid the creditors do have a right to recoup debt when the "estate" is listed as a beneficiary on life insurance. Listing the estate as beneficiary on life insurance means that an estate must be established to receive the life insurance proceeds. Depending on the size of the policy, a full administration will probably be necessary. Whenever an estate is opened, the personal representative (executor) must notify known creditors and publish the fact of an estate for all other creditors.
This is why listing an estate as beneficiary on life insurance is not a good idea. If anyone or anything else (like a trust) were listed, the proceeds would pass outside probate.
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