Three Legal Facts to Know About Life Insurance
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(Last Updated On: September 5, 2014)

September is Life Insurance Awareness Month. If you currently have a life insurance policy – or you are considering getting one – here are three important legal facts for holders and beneficiaries:

1.) Life insurance proceeds may not be taken from the beneficiary to satisfy decedent’s sole debt. As a contract, creditors do not have the legal authority to request non-debtor family members to use life insurance money to pay-off the estate’s debt. If you are married, and live in a community property state, however, creditors may hold you liable for an estate debt that occurred during the marriage. If they hold you responsible, they may pursue the proceeds through legal action. This is the case even if the obligation was created without your knowledge.

2.) Life insurance proceeds designated to minor children will go to the living parent without proper planning. Many people are unaware that if they are not married to the father or mother of a minor child, the other parent will be the guardian over the monies until the child reaches the age of majority. If there are concerns about the parent’s financial decision-making ability, consider an irrevocable life insurance trust that is guarded by the trustee of your choice.

3.) Life insurance proceeds will go to the named beneficiary even after divorce. If your ex-spouse is the beneficiary on the policy, he or she will be entitled to the money upon your death – even if you are re-married. If that is an undesired result, you should change the policy if the divorce decree has not prohibited such action.

If life insurance is part of your legacy planning, it is important to remember these three legal facts to help protect your family.

photo credit: spike55151 via photopin cc

Contributed by Nicole Huffman Hollins of

Three Legal Facts About Life Insurance