If your husband, wife, mother or father recently passed away and they had
life insurance, you may be wondering if the life insurance proceeds will
be used to pay off creditors' claims during the probate process.
If your loved one (the decedent) left behind debts or an insolvent estate
(an estate where the debts and obligations exceed the estate's assets),
it's understandable why you would be concerned about the life insurance.
I have good news for you: Generally, a deceased person's life insurance
is not considered an asset of the estate, nor is it subject to the claims
of creditors. However, for federal estate tax purposes, the life insurance
proceeds may be included in the gross estate.
Life Insurance Is Not Subject to the Decedent's Debts
Under Tennessee law, any life insurance which was taken out by a married
person on his or her own life is for the benefit of the surviving spouse
and children; therefore, the money is to be divided according to the state's
laws of distribution, without being subjected to the decedent's debts.
This is providing that the insurance proceeds are payable to a testate
estate (estate with a will), and are to pass under the provisions of a
will. Life insurance proceeds are not subject to a decedent's debts
unless the decedent specifically directed the proceeds to pay his or her
debts in the will. (T.C.A. 56-7-201)
Whenever a married woman takes out life insurance on her husband's
life, the proceeds shall in no case be subjected to the husband's
debts. Instead, the insurance shall benefit the widow and child, or the
widow and children.
Under Tennessee law, the net amount payable under a life insurance policy
made for the benefit of a wife and/or children, or dependent relatives
of the deceased, shall be exempt from the creditors' claims.
Searching for a Nashville probate attorney?
I hope this answers your questions about life insurance proceeds and creditors'
claims. If you are in need of legal representation in a Nashville
probate case, I encourage you to contact me, David Whittaker, Attorney at Law.
Call (615) 200-9337 today to schedule your free consultation!