When you pass away, you might expect that everything you own will be included in your estate. But as estate planning attorneys, we have dealt with many situations where this is not the case.
The main thing you need to know is that your estate will be divided to serve different purposes after you die. For example, you will have a gross estate for federal estate tax purposes and a probate estate. And depending on the asset, it may already have a designated beneficiary attached to it.
For example, if you have a life insurance and named your child as the beneficiary, the entire benefit will go to your child if you own the policy, and it will be included in your gross estate. However, the proceeds from your life insurance policy will not be included in your probate estate. Because there is a designated beneficiary attached to the policy, it will bypass the probate process.
When it comes to whether a life insurance asset will be available for taxing authorities, creditors, or heirs, the answer is less straightforward. Because your child was named as the designated beneficiary, the proceeds cannot be used to fulfill bequests to others through your will. Even if you disowned your child and changed your will, your life insurance policy is a contract that cannot be overlooked.
The best way to know how an asset will be disbursed or divided after your death is to talk to an estate planning attorney. To set up a consultation with an estate planning attorney, contact our office today.