Livens & Reed, PLLC

Term insurance is a useful tool that can avoid probate expenses

In Texas and all other states, term life insurance can serve a number of uses for estate-planning purposes. Life insurance generally does not go through probate but passes directly to the named beneficiary. In the event that there is no named beneficiary, the proceeds will go to the estate by default and the funds will be subject to probate. In that instance, the life insurance proceeds will be counted as part of the gross estate of the decedent.

The more common situation, however, pertains to the term insurance that has a beneficiary named in the policy. Term insurance generally expires at the expiration of the term. The policy may be effective until the person reaches age 85. If he lives beyond that age, the term has expired and the life insurance expires, causing a forfeit of all premiums paid. Due to these risk features, term life insurance can be significantly more affordable than whole life or other products.

Term insurance is generally available quickly upon the policy owner's death. The proceeds may be intended for payment of funeral expenses and related bills. The proceeds can also represent a handy cash inheritance to designated beneficiaries without the funds having to go through court probate.

The decedent may have informed his or her family that the money is to be used for a college education of one or more children or grandchildren. The immediate cash also helps the liquidity position of the estate. The money can be used to pay bills and the decedent's debts without having to wait to dispose of other less liquid assets.

Other uses of term insurance in Texas and elsewhere are for the continuation of a small or family business by providing finances to buy out one or more officers. Several other business-related uses may come into play. The funds are also confidential and not published anywhere, which makes this an attractive way to provide money to personal romantic interests, faithful assistants or other private relationships without having the money go through public probate.

Source:, "7 things you need to know about term life insurance", Stephan R. Leimberg, Robert J. Doyle Jr., Keith A. Buck, Sept. 26, 2014

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