Legal Question in Wills and Trusts in New York
With regard to the death benefit on a life insurance policy: Is it true that, if a person is named as the beneficiary on the policy, the death benefit passes directly to the beneficiary and is protected against creditors of the deceased? But if there is no living beneficiary, then the death benefit becomes part of the estate and creditors must be paid from the death benefit funds?
2 Answers from Attorneys
Possibly. Life insurance contracts will typically pay out to the beneficiary without regard to the debts of the insured. There are exceptions, however.
Also, if there is no beneficiary designation, then the estate could get the money. However, many life insurance policies have "default" designations to avoid money going to the estate. It's going to be policy specific.
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