What Happens if the Beneficiary of a Life Insurance Policy is Deceased?

In the circumstance that the beneficiary of a life insurance is deceased or cannot be found, then the proceeds that the policy provides will go to the estate of the insured. The estate refers to all the property, real or personal, that goes under the name of an individual.

If a will was left, the estate will be passed along to the deceased person’s heirs according to the terms of the will. If no will is provided, then their estate will be named an ‘intestate estate’ and will be passed to the next-of-kin. This is declared in the state laws of intestacy. When a person dies, an estate will be probated as testate or intestate.

Generally, having the proceeds go to the estate is not considered by many as the best circumstances. The proceeds may be subject to estate taxes or income taxes. Additionally, the funds will be held until the estate is probated. The loved ones of the policyholder who could put the money into immediate use will be deprived of the benefits for some time. And, as the probate process is being done, a notice will be published, giving the creditors of the decedent an opportunity to file a claim. Any debts of the deceased should be paid before any of the estate is distributed to the heirs. Because of these certain issues, it’s a better idea to choose the beneficiaries carefully and provide full information about them. If a named beneficiary passes on, then the policy information should be updated immediately to avoid any inconveniences.

It’s possible for the policyholder to provide additional instructions about what can be done if the beneficiary cannot be found. If it’s according to his or her wishes, a policyholder may request that the proceeds from the insurance policy be donated to a charity.

If the beneficiary passes on before the policyholder, then the policyholder should know his or her options. It’s possible to rename the beneficiary to another person. Another relative can be a replacement beneficiary. As said, even a charity can be named as one. It’s also possible to leave the money to your estate and note name another beneficiary. A beneficiary should be renamed before a policyholder’s death. If not, the death benefit will definitely be left to the estate.

Primary and Secondary Beneficiary
To prevent the trouble of causing the proceeds to go to the estate instead to another person you care for, more than one beneficiary can be named. The primary beneficiary is basically the main person who will receive the money from the company. If the primary beneficiary has died or cannot be found, then the secondary policy beneficiary will receive the benefits.

Minors should not be named as the beneficiaries, since it is not legally possible for them to receive the proceeds. If a minor has been named, the money will have to be held in trust until the individual turns 18. When choosing beneficiaries, it’s important to be specific and up-to-date. It’s a very good idea to update the information while you can.

The policyholder has the liberty of choosing as much beneficiaries for the life insurance benefit. It’s possible not to assign an equal share of the payout to each beneficiary. Certain percentages can be designated.