Home > Research Legal Advice > Estate Planning > Our daughter is beneficiary on our insurance policy (less than $10K). W...
Asked 5 months ago - Tyler, TX
FlagIf we don't get all our credit card debt paid off before one of us dies will my daughter (she is our insurance beneficiary) have to pay the debt from insurance proceeds?
No, the life insurance payment is a contractual matter, and the benefits are paid directly to your named beneficiary(ies). A claim for payment for credit card debt could be made in your estate, and the assets in your estate could be liqudated to pay it. Only if you name your estate as the beneficiary or your life insurance, or if no beneficiaries survive you, would your life insurance proceeds become an asset of your estate.
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The terms of your insurance policy should say that the proceeds will be paid to a named beneficiary, such as your daughter. If your policy is payable to your estate, your estate will be responsible for paying your credit card debts. Please discuss this matter with your insurance agent - if your daughter died at the same time as you or beforehand, the insurance proceeds could wind up being paid to your estate, meaning it would have to go through probate. It is always smart to consider one or more back-up beneficiaries on your insurance policy. Hope this perspective helps!
Not out of the proceeds per se, but once its in a bank account, it can be seized. Is there a reason your daughter should not pay a debt that she incurred if she was to come into money? For example, is the money supposed to be used for funeral expenses, because if that's the case, there are ways to protect it. Otherwise, payment of a justly incurred debt seems like a good use for an inheritance.
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