Question time. What happens when you do not have a valid last will and testament in place but when you do have a life insurance policy with a nominated beneficiary?
Let’s say you have one child and no spouse. Well, then intestate succession laws (passing on without a will) dictate that your child will inherit your entire estate – what is left of everything you own once your creditors have been paid accordingly that is.
HOWEVER, if you nominated your mother as the beneficiary of your life insurance policy = your life insurance policy has a duty to pay out to your mother. The executor of your estate (person overseeing all the payments and arrangements of everything you own and owe) and intestate succession laws (meaning your child gets everything) have no say in the matter. Your mother still gets the life insurance policy pay-out.
Although the life insurance pay-out will be included/ listed in your estate for estate duty (tax) purposes, and your mother might be expected to pay her part of the taxes, your life insurance policy will pay directly into your mother’s bank account once the insurance company has received your death certificate and other documents.
So what happens when your life insurance policy does not have a beneficiary in place and you do not have a valid will? Based on the scenario above of having one child, the pay-out of the life insurance policy will form part of your estate and your only surviving child will receive the benefits once all your creditors have been paid.
It is important to always keep your insurance policies and the beneficiaries thereof updated. It is also in your best interests to draw up a valid will as soon as possible. Legal Hero members, please contact our offices today should you not have a valid will in place.