Free Life Insurance Proceeds Letter

In most cases, the proceeds of life insurance are payable to a named beneficiary designated by the insured during his or her lifetime. However, the proceeds may be payable to the insured's estate, either as the designated beneficiary of the proceeds or if the insured failed to designate a beneficiary.

If the company's liability under the policy is in doubt, the appointment of a probate executor or administrator may be necessary so that someone has court authority to act for the decedent's estate.

If the insurance policy was provided through an employer, then the "Employee Benefits Letter" should be used to request information and proceeds.

The recipient of this letter may have questions about some of the information that you have provided or may require additional information. Therefore, your letter should explain how you prefer to be contacted.

Generally, in order to collect the proceeds of insurance on the decedent's life, the insurance company will require the following documents:

1. Proof of Loss Form, which is obtained directly from the insurance company;
2. Certified copy of the Death Certificate or physician's statement;
3. Insurance policy; and
4. Affidavit of Heirship (in some cases).

Many decedents are entitled to benefits from their current or prior employers under pension or profit-sharing plans, or under a plan which the decedent maintained as a self-employed person. In fact, for many individuals, the largest component of their wealth is comprised of benefits payable under employee benefit plans.

Employee benefits payable to others after the employee's death usually pass outside of his or her probate estate, unless the estate itself is designated as the beneficiary. In order for the beneficiary to collect the benefits, it is generally sufficient merely to advise the person administering the plan of the employee's death. In some cases, proof of death, usually a death certificate, is required.

If the decedent owned a life insurance policy on the life of another person, the value of any such policy is included in the gross estate of the decedent. An IRS "Form 712" from the insurance company will indicate the current value of the policy.

The personal representative has the option of keeping the policy in effect as before the decedent's death, but the policy's beneficiary will likely be changed. Otherwise, the personal representative may choose to "cash in" the policy if it has a cash value.

Life insurance proceeds are generally included in the "gross estate" (for death tax purposes) of the decedent if either (a) those proceeds are payable to the decedent's estate (rather than directly to an individual beneficiary), or (b) if, at the time of death, the decedent had any "incidents of ownership" in the policy. Generally the decedent held "incidents of ownership" if the decedent was able to do any of the following:

1. change beneficiaries;
2. assign the policy;
3. sell the policy;
4. borrow against the policy;
5. pledge the policy as security on a loan;
6. receive dividends under the policy or apply dividends under any options provided by the policy; or
7. surrender the policy for its cash surrender value, paid up value, or extended term insurance.

The valuation of the decedent's estate is complicated if the decedent was a sole or controlling shareholder of a corporation which owned a policy of insurance on the decedent's life or if the corporation held other incidents of ownership of the policy. Consult an attorney for further assistance.

IRS "Form 712" describes how much and to whom the proceeds of the life insurance policy will be paid. This information is generally required in connection with the valuation of the decedent's "gross estate" for death tax purposes.

If an "executor," "administrator" or "personal representative" has been appointed by a court to act for an estate, the insurance company generally will require a certified copy of the court document bestowing that authority (called "Letters of Appointment" or "Letters of Administration").

Insurance proceeds on the life of a decedent should be collected by the family or personal representative as soon as possible after the decedent's death. These proceeds are an immediate source of available cash for the payment of debts and/or support of the family.

1. The Life Insurance Proceeds Letter should be signed by the writer. A copy of the letter and any documents enclosed with the letter should be retained by the writer for his or her records. In addition, the writer should keep a copy of all correspondence from the insurance company and maintain a written summary of all telephone conversations.

2. The life insurance company may require certified copies of certain documents, such as the Death Certificate and Letters of Administration, to be sent along with the letter. When a certified copy is required, the writer must send the original and not a photocopy of the document. Photocopies (rather than originals) of any other relevant documents may be included with the letter.