Probate and Life Insurance- How they Intersect

October 11, 2021

Typically, life insurance policies pass outside of the probate process once you pass away. What this means is that the money owed to your beneficiary gets mailed directly to that beneficiary and does not get included in your estate in the probate court.

Your probated estate will include other assets that you distribute through the terms of your will. A personal representative will be appointed to inventory all of your probate assets, notify any possible creditors and then make distributions accordingly in line with the various rules of estate administration. This may include paying necessary taxes, funeral costs and all valid claims against the estate.

While life insurance should bypass the probate process, things may not always go as planned.

Deceased or Missing Beneficiary

If the beneficiary listed on the life insurance is deceased or is unable to be located, the money will have to be paid into your probate estate and distributed to beneficiaries listed in your will. If you do not have a valid will, the money will be included in your estate and distributed according to the Maryland laws of intestate succession.

No Beneficiary Listed

If you do not list a beneficiary at all on your life insurance policy, the same thing happens. It will be included in your probate estate and distributed according to your will (or intestate succession if no will). If any of the beneficiaries either listed on your policy or determined through probate is a minor, then a guardian will have to be appointed.

If it is determined that no valid beneficiary exists, the life insurance company will write the check to the probate court. The money is then included in the probate estate. The named personal representative will manage the assets along with all the other assets. The money will be used to satisfy valid claims and then distributed to heirs.

Tips for Avoiding Life Insurance Payouts from Going to Your Probate Estate

1. Keep your policy up-to-date. If your beneficiary passes away, update the designation with a new beneficiary.

2. If a Beneficiary is a Minor, the life insurance needs to be placed into a trust to avoid probate.

3. Designate a contingency beneficiary. Listing a second option reduces the probability of the policy having to go through probate. Some policies will also allow co-beneficiaries and if one of the listed co-beneficiaries is deceased or unable to be located then the full amount of proceeds go to the other co-beneficiary.

Remembering to check your life insurance policy beneficiary designations periodically is the best strategy for avoiding the policy ending up in probate. Update the policy after any major life event such as marriage, divorce or death of a loved one.

One other item to keep in mind regarding life insurance proceeds is that the amount will be included in the decedent’s taxable estate regardless of whether it goes through probate or not. The cash value of a life insurance policy purchased and owned by the deceased is included in that individual’s taxable estate and is subject to estate taxes. Currently, the exemption amount is extremely high ($11,580,000), but that is expected to change by 2025. Be sure to factor in this cash value amount when figuring up a strategy to minimize estate taxes.

For more information on comprehensive estate planning that incorporates life insurance policies, contact the estate planning attorneys at Stouffer Legal in the Greater Baltimore area. You can schedule an appointment by calling us at (443) 470-3599, emailing us at, or register for an upcoming free webinar using the link below:

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