Legal Question in Wills and Trusts in Massachusetts
Insurance
I was named both the exectutor of the will and the sole beneficiary of life insurance policies and 401K. Essentially wearing two hats.
I am not sure if the monies are an asset of the estate, which is headed for probate. If so, they will be subject to the creditors - Significant amount and lengthy process.
If not, am I free to distribute these same monies as ''I wish'' as I am directed to, by the relative who passed? If, this is true, the ''estate'' become insolvent, and none of the creditors can be paid anything. Relative had nothing of real value.
Any help?
3 Answers from Attorneys
Re: Insurance
Although the life insurance money is not considered an asset for probate purposes, there may be Federal and Massachusetts Estate Tax considerations in this situation if the total value of the life insurance policy and the other assets of the Estate combined are over a certain dollar amount, around 950k for Massachusetts and 1.5 mil. for Federal estate taxes depending on when the person died.
After any applicable estate taxes are paid, the remaining life insurance money can generaly be spent however the beneficiary wishes. If you are uncertain, it would be wise to consult with an Attorney to make sure that the tax situation doesn't become a problem.
Our office has extensive experience in tax law and estates, we would be happy to provide further consultation if you decide to retain our services.
Re: Insurance
The Life Insurance Proceeds and 401 K if left to you as an individual are generally not part of the Probate Estate. You should however contact an attorney with respect to the issue of Federal and State Estate Taxes before distributing anything.
As to how you distribute the Probate Estate, that will depend on the assets available and the claims presented. I assume there is a Will and perhaps a Trust. I would contact an attorney to assist you as soon as possible.
Re: Insurance
Life insurance, if paid directly to a beneficiary, is not considered an asset for probate purposes, however, it may be attached to satidfy certain federal and state tax requirements. Once the final tax return and estate tax forms are complete and paid, the beneficiary (you) should not have any problems.
It would be wise to consult with an attorney during to handle probate, especially where there are a large number of potential creditors and their respective claims may need to be reviewed. Please feel free to e-mail me with any follow on questions.
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