when is life insurance proceeds subject to creditor claims

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Expert Solution

Generally life insurance proceeds pass directly to the Beneficiary with any creditor's claim on it. However there are some exceptions to this rule:

a. When Estate is named as Beneficiary: If the deceased person has not named an Individual as Beneficiary, rather named Estate as Beneficiary, then the valid debts of Creditor can be paid off from the estate before final distribution to Beneficiaries of the estate. Thus no naming a Beneficiary or naming Estate as Beneficiary may be one of the exception.

b. When Spouse with whom the deceased has joint financial obligations such as Credit Card, Mortgage Loan, Personal Loan, then in such case, if Spouse is named as Beneficiary,then the Life Insurance Proceeds may be subject to Creditor's Claims.

c. Life Insurance Proceeds received by Beneficiaries may be subject to their own creditor's claims.

ekkarill92 answered 1 year ago

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