Life Insurance – The only Way To Avoid Probate?
photo credit: h.koppdelaney
Probate is a largely unavoidable part of life and death, which many of us dread. In isolated yet abhorrent cases, a person’s estate can remain tied up in the courts for months, sometimes years, meaning that not only do the beneficiaries have a lengthy wait before gaining the rightful ownership of their inheritance, but they are also in a position where it is difficult to move on from the death of their loved one, due to being left in a state of purgatory as they await the grant of probate.
For those who do not know, probate is essentially, the process involved in naming a particular person who is given permission to deal with the distribution of an estate.
The need for probate is based upon the value of the estate. Although the limit for which a probate is not required varies from country and state, the limit is usually very low, meaning that most deaths will be followed by the need to obtain probate.
The primary issue with this is that in most cases, the deceased’s family will be left for some time without the resources needed for essentials such as paying a mortgage. In addition, if the deceased has died without leaving a will, the government are the ones who decide to whom the estate should be passed onto. This is generally, the immediate family of the deceased, such as any children or spouse.
However, life insurance does, to an extent, offer a way around probate. While all facets of an estate including money, property and valuable possessions are all required to be subject to a probate grant, any pay-outs made as part of a life insurance policy are not. Essentially, the life insurance policy is able to bypass probate.
This is of great advantage for a number of reasons. Firstly, probate fees can be very expensive, and often, the more complicated the matters involved in obtaining probate the higher the probate fees will climb. However, the more money that has been tied up in a life insurance policy, the less money there is to be managed whilst applying for probate, thereby keeping the probate fees as low as possible.
Secondly, as has been mentioned, obtaining probate can often be a long and dragged out matter, meaning that the family can be left without essential funds for very long periods of time. However, life insurance pay-outs are generally made within 30 to 60 days, allowing for considerably quicker access to necessary money than is usual with probate.
What’s more, should a person not have left behind a will, the deceased’s family have no say in who is going to be beneficiaries of their estate. Life insurance policies however, allow for a beneficiary or beneficiaries to be named, to whom the claims will be paid directly to. This means that the deceased is able to look after loved ones who may not have been immediate family members, and would have been entitled to nothing according to a probate.
To summarise, while probate cannot be entirely avoided, life insurance policies do hold some advantages due to the fact that they can help keep probate fees to a minimum while also ensuring a deceased’s loved ones are cared for, regardless of the length of time involved in obtaining probate.
This article was written by James Harper on behalf of Wills and Probate. James is a talented writer on many subjects including probate fees and insurance matters.