How to Avoid Probate With Life insurance

Avoid Probate With Life Insurance

How do you avoid probate with your life insurance? This is a very important topic. A lot of people don’t know what probate is.

Wikipedia defines probate as “The judicial process whereby a will is “proved” in a court of law and accepted as a valid public document that is the true last testament of the deceased, or whereby the estate is settled according to the laws of intestacy in the state of residence [or real property] of the deceased at time of death in the absence of a legal will.”

Sounds complicated and that is because it truly is.

Let’s briefly explain in a short and simple version of what is probate and then dive in on how to avoid it, because this is something that is terrible for beneficiaries to have to deal with when a loved one passes away and it comes time to collect the money agreed to in the life insurance policy that’s supposed to skip probate entirely.

A simple explanation of probate is that when you pass away, the state that you live in grabs hold of your assets. This can include a myriad of things, anything from bank accounts to real estate.

The state retains other things of value, including bank accounts, jewelry and other assets. They can say “Hey, you’re not allowed to transfer ownership of these things. You’re not allowed to access these things until we figure out who was supposed to receive this.” Probate is the time when family members, even friends, Joe, Bob, that you’ve never met must convince the state and its courts that you have the right to the assets.

Anyone can say “Hey, I have a claim to that estate.” Anything that’s being passed down from your passing is subject to claim from those who think they have a right. Probate is that period of time where all of that is dealt with. The length of time for probate can be anywhere from a month to two or three years. Now, usually probate is going to be a minimum of six months, and usually, it’s about six months to about 18 months. You want to avoid probate with life insurance.



It takes a long time. So if you can imagine if you pass away someday and your loved ones need the money or the value that you have in your estate and they can’t access it, what will they do? It’s an unfair burden to pass on to them.

So probate is a very serious thing. Now, life insurance, if done correctly, if written correctly by an agent that’s savvy, that knows what they’re doing, is going to completely avoid probate to where it instantly goes from your passing to your loved ones and their receiving the benefit of that policy, without delay.

Structuring Your Policy to Avoid Probate

So that’s the goal and  you do that is when you’re structuring your life insurance policy.

It’s all about how you write in your beneficiaries, if you’re doing a term life insurance policy, whole life insurance policy, burial insurance, mortgage protection, all these variations of term and whole life insurance.

Any of those, if you name a specific beneficiary, meaning a person or if you name the trust as a beneficiary, that is going to solve your problem. That is the short and dirty version of it.

Now, there are a lot of people that don’t have a trust. Instead, they have an estate which is formed when you create a will.

A will and a trust are very different things. The trust is vastly superior to a will, but a will, can be free or very cheap to set up. Whereas a trust is going to cost more money and take more consideration. It’s a good idea to have an attorney draw that up for you. A trust is not a required, but it’s a good idea to do that.

The Importance of a Trust

Wikipedia defies a trust as: A three-party fiduciary relationship in which the first party, the trustor or settlor, transfers (“settles”) a property (often but not necessarily a sum of money) upon the second party (the trustee) for the benefit of the third party, the beneficiary.

Basically, it means an agreement is made between you –the grantor, and someone else who acts as a trustee to make sure your assets are divided properly between those you mention in your will, your beneficiaries.

Same thing with a will.  You should always have an attorney take a peek at it or draw it up from scratch for you, and then take care of that.

So if you have a will which forms an estate, that’s better than not having an estate because again, probate is going to take a lot of time.

We have heard from plenty, plenty of clients where they had to wait two, two years or longer, for probate. So an estate will cuts down on the probate time to more like three to six months, for complicated cases, closer to a year.

Still, a will is going to cut down on the time the estate remains in probate. And that does make a big difference to your loved ones.

So that is good to do that. If you don’t have anything in place, at least get a will going so that you have a legal estate you can pass on. It slightly clarifies what’s going to happen from your passing to who’s going to receive it. It avoids probate with life insurance.

And when we say slightly, I just mean in the eyes of the law. And the reason why we have probate is because if there’s any degree of murkiness at all about who gets your estate and under what circumstances, the courts will decide who gets what.

There is commonly a lot of debate about that. When people pass away, a lot of people reach their hands out and they say, mine, mine, mine, and you would never expect this to happen. These are people that are generally seen as good people, generous people. And then when they think they might have a shot at part of an estate or all of an estate they will come out of the woodwork.

They change. Money makes people do strange things they otherwise wouldn’t. This is something that’s very hard to predict, and that’s why it’s so important to take care of your affairs in this way.

So again, this is the way to  avoid probate completely with your life insurance. You don’t want that to be, to go out to the estate and have other people try and grab up the policy benefit.

So what you do with your life insurance policy is you name a specific person, which has to be a family member or domestic partner. It can’t be a friend. It has to be a biological connection somehow. The exception is a domestic partner. That does work as well. If you name abc estate as your beneficiary, you can absolutely do that.

Just know that the life insurance payout is going to be impacted by probate. It’s going to be the short version of probate. It’s going to be,  the estate version of probate, but it’s going to go out there. It’s going to mingle with that. And then as soon as the state gives it, their stamp of approval, then the life insurance policy amount is going to go to the beneficiary, which is the estate. Then it’s going to trickle down to wherever it needs to be

You can avoid all that by being very specific in naming your beneficiary when you create your life insurance policy.

So just know that going into it, it’s the best way you can do this. Ask yourself if you need an estate will or a trust then go out and get it done after you choose which one works best for you.

Call a couple of trust attorneys and ask how much would this cost you for a basic trust.

It might be less than you think. And there might be a way to work that out. That’s the absolute, best thing you can do for a lot of reasons.

Your Loved Ones Will Appreciate You

Your loved ones, when you pass away,  are going appreciate you did this and put together this trust so that the probate goes smoothly and

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There is no need for them to wait months and even years to inherit what you worked so hard all of your life to achieve.

Your home, your bank accounts, your savings, your car, your assets, your jewelry, your clothes, even who is going to be gifted with your pet, all of this is dealt with in a trust with a will.

With a solid life insurance policy where the beneficiaries are clearly named and documented, combined with a will or an estate, you can rest easy knowing your family will be protected and taken care of after you are gone.

We hope this has been helpful. Please reach out to us, call us, visit our website If we can help you with anything else. we want to know and want to take care of ya all. Alright. Stay safe out there.