No, Life Insurance is generally not subject to Creditor Claims upon death. If you are alive, and have cash value within a life insurance policy, it may be subject to Creditor Claims is you are taking money out of it, especially as a withdrawal.
Generally speaking Life Insurance Death Benefits are free from Probate, meaning no claims can be made.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
Life insurance death benefits pass from your company to your beneficiary. If you owe money to someone they can only take action if you withdraw money from the policy. The death benefit is someone else’s property. It could be that your beneficiary’s creditor might take action upon their receipt of the proceeds.
A life insurance claim is only created at a death of an insured and passes to another beneficiary. Therefore the person in debt has now passed on along with their debts. The beneficiary has no responsibility for the deceased debts. Any monies paid on behalf of the deceased is strictly voluntary by the beneficiary.
If it is the Insured person and Policy Owner who has the claims against them, and they die and leave the life insurance proceeds to a beneficiary, the beneficiary does not have to pay the claims of the Insured unless they co-signed for that debt. If there is no beneficiary and the life insurance money ends up in the estate, creditor claims can be filed during probate.
If it is the beneficiary who has the claims against them, it depends on the state of residence as to whether a claim can be filed against the beneficiary's life insurance proceeds, and/or how much of the death benefit is subject to creditor claims.
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Generally speaking Life Insurance Death Benefits are free from Probate, meaning no claims can be made.
If it is the beneficiary who has the claims against them, it depends on the state of residence as to whether a claim can be filed against the beneficiary's life insurance proceeds, and/or how much of the death benefit is subject to creditor claims.