Life insurance is often a significant part of someone’s estate. So does life insurance pass through a will? The short answer is that usually proceeds from a life insurance policy pass directly to whomever was designated as the beneficiary or beneficiaries on the beneficiary form that was filled out for the policy. When this is the case, the insurance company just needs a copy of the death certificate for the person who died, and then they will distribute the funds as directed by the form. The good thing about this is that these proceeds will get distributed quickly with no need to wait for probating the estate with or without a will.
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However, sometimes a person may not want the proceeds on their life insurance policy to go directly to an individual beneficiary. Maybe the beneficiary is a minor or just not good at handling money appropriately. Or maybe the beneficiary is incapacitated in some way due to an illness or whatever. Or perhaps there is a concern that the beneficiary is likely to get sued for some reason in the future, or that the beneficiary will marry someone who that person thinks will just syphon off the money. For these and other scenarios, the person could set up a trust of some sort to handle the funds.
If a living trust is set up, then the beneficiary form would say that the funds should go directly to that trust. This still keeps the funds out of the probate estate. But if the person were to set up a testamentary trust within their will to take on these funds, then the funds would be part of the probate process, albeit not part of the probate estate. The funds would pass to the trustee whose powers as trustee would spring to life upon the probating of the will.
If there is a signed beneficiary form and the form says that the proceeds should pass to the estate, then the funds would be part of the probate estate. If there’s a will, then it would get distributed per the terms of the will. If there’s no will, then it would get distributed per strict intestate distribution rules in the Texas Estates Code.
If no beneficiary form was filled out, then it depends what the fine print of the policy says. Some policies say that if there isn’t a signed beneficiary form, then the funds go to the probate estate. Other policies might have a backup distribution plan that says that the funds should be distributed to certain family members in a particular pecking order, eg. first to surviving spouse, then to children, etc.
If you do have life insurance or plan to get some, you should definitely plan accordingly to make sure the funds get distributed the way you really want them to be distributed.
