What happens to life insurance during probate?
Key takeaways
Probate is a legal process to deal with the money, property and assets of someone who has passed away
The probate process is easier if there is a will in place
Executors named in the will are usually responsible for probate
Life insurance in a trust with a beneficiary won’t have to go through probate
What is probate?
When someone dies, their assets such as their property, money, and possessions must be sold or transferred, their debts settled and what's left paid to their beneficiaries. This process is known as probate.
Probate ensures that financial affairs are settled as per the deceased's persons wishes in their will. If there is not a valid will in place, the ‘rules of intestacy’ determine who is responsible for probate and who is entitled to inherit.
During probate, several legal steps are necessary. These include validating the will, appraising any property, and paying debts and inheritance tax (IHT). Finally, the remaining assets are distributed to the rightful heirs.
Probate plays a crucial role in preventing legal disputes among family members and beneficiaries. It also ensures that all financial obligations are met before closing the estate.
How does probate work?
There are several steps involved in the probate process:
1. Determine if probate is needed
Not every estate needs probate. For example, if the deceased person owned property and assets jointly with a spouse, everything transfers to them automatically.
2. Apply for probate
This can be done online or by post. You’ll need to send the original will with your probate application, as well as a death certificate.
Only certain people can apply for probate. This will be the executors named in a will or, in the absence of a will, the closest living relative.
3. Value the estate
The executor assesses the estate's value, including property, money, and possessions.
4. Pay debts and taxes
The executor ensures all debts, bills, and taxes are paid. This may involve settling loans or utility bills.
5. Distribute assets
After clearing all debts, the remaining assets are distributed to the beneficiaries as outlined in the will.
6. Resolve any challenges
Common challenges include disputes over the will and claims against the estate. These are usually resolved through legal advice and negotiations.
Who is responsible for probate?
When someone dies, their estate undergoes a legal process called probate. The key figures in this process are the executors and administrators.
Executors will be appointed in the will. They are tasked with executing the deceased's wishes. There can be up to four people named as executors and they will usually be a partner, family members or close friends.
In some cases the executor could be a solicitor or a financial institution (but this can be expensive).
If no will exists, or no executor is specified, an administrator is appointed. This will usually be the next of kin who has completed the process of obtaining a Letter of Administration (LOA).
The executor or administrator is responsible for collecting the deceased's assets, settling debts, and distributing the remaining assets according to the will or law.
Selecting an appropriate person for probate duties is crucial. This role demands people who are trustworthy and capable of managing financial affairs and complex paperwork.
Often, people choose close family members or professional advisors to manage the process efficiently and honour the deceased's wishes.
How do you apply for probate?
First, register the death. You should do this within five days via a register office.
You should then collate the relevant paperwork. This will include the original will, the death certificate, and details of the deceased's assets and debts.
You’ll need to value the estate and work out if inheritance tax (IHT) is due. The gov.uk calculator can help you work this out. If IHT is due, you might need to pay some of it before probate is granted, but this can be claimed back from the estate if you used your own money.
Then you can complete the probate application form. This form is available online at the Gov.uk website or from your local Probate Registry office. Alternatively you can pay a solicitor to do it on your behalf.
How much does it cost to get probate?
Probate fees are primarily determined by the value of the estate.
In England and Wales, if the estate is valued at more than £5,000, the application fee is £300 (as of December 2024). There’s no fee if the estate is worth £5,000 or less.
You may be able to get state help to pay the probate fee and other court fees if you have a low income or are on certain benefits.
During the probate process, additional costs can emerge. These include legal advice fees, valuation costs for property and other assets, and potential court fees if disputes arise.
Death certificates cost £12.50 each. You can order multiple copies of the certificate on the registration appointment booking form. You might need extra copies to send to various banks and other financial institutions.
Expenses can vary widely depending on the complexity of the estate and the necessity for professional services. If you need a solicitor, get quotes from multiple solicitors for comparison.
What happens to life insurance during probate?
Life insurance only goes through probate if it forms part of the estate. If the policy is written in trust, it sits outside the estate and is usually paid directly to the named beneficiaries without waiting for probate.
If the policy is not written in trust, it is treated as part of the estate. The insurer will normally wait until probate is granted before paying out, and the money is claimed by the executor and distributed under the will or intestacy rules.
What happens to a life insurance policy if there is no will?
If the policy is not written in trust, it normally forms part of the estate and is dealt with under intestacy rules after probate. If the policy is in trust, it can usually be paid out to the beneficiaries without probate, even if there is no will.
What if the life insurance beneficiary has already died?
If no alternative beneficiary is named and the policy is not in trust, the payout may be paid into the estate and handled during probate. This can delay payment and change who ultimately receives the money.
Can life insurance be used to pay estate bills before probate?
Only if the policy pays out outside the estate. Life insurance written in trust may be paid quickly and used by beneficiaries to cover funeral costs or urgent expenses.
If the policy forms part of the estate, the money is usually unavailable until probate is completed.
What documents are needed to claim life insurance during probate?
If a policy forms part of the estate, insurers usually require:
A death certificate
Probate or letters of administration
A completed claim form
This is different from policies written in trust, which do not usually require probate documents.
What happens to joint life insurance policies during probate?
For most joint life policies, the payout goes automatically to the surviving policyholder on the first death and does not form part of the estate.
Probate usually only becomes relevant on the second death, unless the policy is written in trust.
Can probate be delayed because of life insurance?
Yes. If a life insurance policy forms part of the estate, probate cannot usually be completed until the policy value is confirmed and included in the estate valuation. This can slow down the overall probate process.
How can I check if a life insurance policy will go through probate?
You can check the policy documents for a trust deed or ask the insurer directly. If there is no trust in place, the policy will usually be dealt with as part of the estate during probate.
Compare life insurance quotes with MoneySuperMarket
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