Is a life insurance policy public record?

For the most part, life insurance policies are not a part of any public records. Life insurance proceeds are paid directly to a named beneficiary and therefore do not pass through a probate estate.

The process of probate is the legal action that is taken by the estate court to prepare and distribute assets of the death of an individual.

The logic behind keeping any life information out of the public eye a very well-thought-out because if the information were to be made available to the public, the result would be chaotic.

Every fortune-seeker would be following life insurance beneficiaries and policyholders and pestering them forever about special deals and schemes, just to be in on getting some of the money.

People with cash values would be encroached upon by investment schemes, and other unscrupulous insurance agents would be scheming to get people to replace their policies.

It is in the best interest of the owners of life insurance policies and their beneficiaries to keep their life insurance information confidential.

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–Examples of Life Insurance Information That Appears in Public Records

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  If You Have A Will – If you make out a will, and you make the beneficiary of your life insurance, the details of your policy will be involved in the probate of your estate, which will put it in the public eye.

• In a Divorce – Ultimately if the details of the divorce shows up in the public records, details about the life insurance.

• If No Beneficiaries Are Living – The death benefit could wind up in probate, thus making it public.

• If Your Estate Owes Large Estate Taxes – The information would be going through probate court, and would very likely be in the public eye.

• Life Insurance That Has Incidents of Ownership – Incidents of ownership includes the right for the insured to pay premiums, change beneficiaries, change policy options, and to have rights to the cash values of the policy.

If Your Life Insurance Proceeds Falls Into the Hands of Creditors

In most states, creditors of the insured do not have access to the proceeds of the life insurance payable at death, if the insured owes money. Life insurance death benefits are normally not paid through the probate process, as the life insurance company pays directly to the named beneficiary of the policy.

The problem arises when the beneficiary owes money to a creditor, which can easily happen if a husband and a wife owe money jointly to a creditor.

In such an instance, the debts of the deceased husband are the debts of the beneficiary, in this case, the spouse. That being the case the creditor could potentially attach the life insurance proceeds as soon as the money is received by the spouse and put into the bank.

Most states have a provision that prohibits creditors from attaching life insurance proceeds, but as soon as the proceeds are received, they cease to be life insurance proceeds.

The use of the settlement options of the life insurance company can be used to forestall creditors attaching the proceeds. An income stream can be set up to pay the money over time to the beneficiary, or the deposit option can be used.

The deposit option keeps the money on deposit with the insurance company and pays interest to the beneficiary. The beneficiary has discretion as to how much money to take out of the deposit fund and when.

Of course, it is possible for the knowledge of insurance proceeds to be in the public records when creditors attach the life insurance proceeds if they are able.

Keep Life Insurance Out of Public View With A Trust

A trust can be a valuable tool for life insurance planning, and it can be setup rather easily.

A life insurance trust can be established as an Inter Vivos or living trust which will cause all of the property that is placed into the trust to pass directly to a beneficiary or beneficiaries without having to go through probate.

The privacy of the affairs of the family who established the trust is protected, as all of the property and funds of the family, is already in the trust, so there is no transfer of any assets from a physical standpoint.

Since nothing needs to be probated, there is no chance for the privacy to be broken.

This type of trust is also ideal when minor children are still at home. If a simultaneous death should occur which takes both parents, a guardian would have been named and the trust would receive life insurance to fund the upbringing of the children by the guardian.

Most living trusts are of the revocable kind which gives the controlling family members the right to control their property that is held in the trust.

As such the property owner has complete control over the property, yet when death occurs, privacy is assured.

Be sure to hire an attorney to draw up a trust such as this that will be complicit with your will and both instruments will work together if a death should occur. The trust is the instrument that holds the assets, and the will is the instruction as to the disposition of the assets.

In Conclusion

In most situations, a person’s life insurance and the details surrounding the ownership and workings of their life insurance coverage is never going to be in any public records.

The proceeds of the death benefits are designed to be paid directly to the beneficiary of the policies, and thus they do not pass through the process of probate.

While there are instances where a possibility of information could be available for the public to find, it is mostly because of the way that the insurance is owned or managed.

If proper steps are taken to arrange the ownership and disposition of the policies upon death, allowing any information to get into public records can be thwarted.

–Be Sure To Get Help

It is always a good idea to seek professional assistance when establishing any legal instruments. Working with a good life insurance broker and a knowledgeable attorney will go a long way to the point of setting up your overall plan for you and your family.

Periodic reviews and updates as necessary is a normal course of events as family circumstances evolve and change over time.

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