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Is Life Insurance Subject to Creditors' Claims in Tennessee?

Nashville Blog 2015 July Is Life Insurance Subject to Creditors' Claims in Tennessee?
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Is Life Insurance Subject to Creditors' Claims in Tennessee?

Posted By David Whittaker, Attorney at Law || 1-Jul-2015

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!

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David Whittaker, Attorney at Law

Call Today: (888) 492-4735

David Whittaker, Attorney at Law - Nashville Probate Attorney
1616 Westgate Circle, Suite 127, Brentwood, TN 37027 View Map
Call Today: (888) 492-4735
(615) 289-6284
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