Is a Life Insurance Policy Beneficiary Required to Pay for a Funeral with Insurance Proceeds?

It’s not that uncommon for a close family member to be named as the executor of a parent’s will. Let’s say that rather than your brother, it’s your stepsister who is the executor of your father's estate.

This person has failed to provide any documentation about where Dad’s assets and money have gone.

Add to this the fact that sis has asked all of the siblings to forfeit their life insurance proceeds to her to pay for Dad’s funeral—a funeral that no one can attend because of the coronavirus.

What can the siblings do about the actions of their stepsister as executor of their father’s will?

A recent nj.com article asks “Do we have to pay for a funeral with life insurance proceeds?” According to the article, it’s becoming more frequent that estate beneficiaries are hiring their own attorneys to make certain the executor administers the estate properly.

Hiring a private probate attorney is especially common when stepsiblings and multiple marriages are involved.

In most states, the appointed executor is obligated to account in detail to all estate beneficiaries what she has done.

In addition, there’s absolutely no requirement that a named beneficiary of a life insurance policy must hand over their pay-out to pay for the decedent’s funeral or estate debts—unless there was some sort of agreement to do this.  If you want to control the distribution of life insurance money when you are gone, you might consider naming your Living Trust as beneficiary of your life insurance policy. Talk to your estate planning attorney about the benefits of handling these funds via a Living Trust.

Beneficiaries of an estate are entitled to an accounting and should demand one in writing.

The beneficiaries could also ask to review the bank statements of the estate that show all transactions, if they are unable to get an accounting from the executor.

If an executor is not complying with the law and her duties under it, it can be extremely hard for beneficiaries to see results without hiring an elder law attorney or probate attorney who knows how to get this accomplished.

Reference: nj.com (June 16, 2020) “Do we have to pay for a funeral with life insurance proceeds?”