As you are battling through the 100+ steps of settling an estate, you might get lucky: A life insurance company might find you and deliver a large check. It could happen, but it’s unlikely to be that simple.
In theory, life insurance companies are supposed to scan the Social Security database for reported deaths. But it’s not advisable to assume that they will find you. In recent years, it’s been reported that billions of dollars of life insurance proceeds have gone unclaimed. Even if insurance companies make the effort required by industry standard, them finding you may be easier said than done. Think about it, the policy might be decades old and the beneficiary addresses on record may not be current. Not many of us are living at the same address we did 20, or 30 years ago, after all.
So, if you want to make sure insurance proceeds are paid out, it’s best to go into detective mode and look for an existing policy. Where should you start?
First, locate the life insurance policy.
The best place to look is in your loved one’s personal papers and belongings. Look in desk drawers for old policy booklets, payment coupon books, canceled checks, statements, or any other insurance-related correspondence.
Many people keep years’ worth of canceled checks in shoeboxes, bedroom closets, or the basement. Looking through them all is a tedious process. Fortunately, many insurance policies have annual payments so you’ll likely find any existing policy if you look through one year’s worth of statements. Many policies issue an annual statement, so the desk drawer full of old envelopes or the dusty file cabinet can also be important places to look. The policy also could have paid some type of dividend, in which case old tax returns will give you insight as to policies that might exist.
Keep in mind a life insurance policy might be connected to where your loved one worked, so check with current and former employers about possible policies, too.
If you’re coming up empty you can also check with the state’s “unclaimed property” office to see if any unclaimed life insurance money was turned over to them. The National Association of Unclaimed Property Administrators’ website includes a link to each state’s unclaimed property office. Keep in mind, however, money isn’t considered unclaimed unless a full year passes without activity or contact with the account/policy owner. So as executor, you’ll still need to do your due diligence to find the money ASAP.
In general, the search process can be tedious and you can certainly ask one of your family members or beneficiaries to help. But as executor, the responsibility to find all the assets within the estate ultimately falls on you.
After you find the policy, talk to the experts.
If you do find a policy (or policies), you can simply call the customer service number for the insurance carrier and they can walk you through the process of making a claim. You’ll need to fill out some forms (of course) to complete this process.
You likely don’t need help from a tax accountant in this process, as the proceeds from a life insurance policy are typically not taxable income. That said, if you earn interest income on the policy, that will be taxable income to the beneficiary.
You might want to reach out to a financial planner. Make sure this individual is a “fiduciary.” That means that they are required to act in your best interest. If it’s a sizable policy, it’s smart to have a plan in place as to how to build the proceeds into a personal financial plan.
At times, life insurance providers might push you into rolling proceeds into a new “life income,” “specific income,” or other policy. Of course, the insurance agent would love to keep your money within their company (and would like to make a commission on that sale), but in many cases, this will not be in your best interest or the best interest of other beneficiaries. So be sure to talk to a trusted financial advisor first.
And remember, if the insurance company can’t find you, and you don’t find them, the policy will not be paid anytime soon — so be diligent on this one or you may leave a major asset in the estate unclaimed for too long or forever.
If you’d like to learn more about your role as executor, and get a free custom plan to help you understand your responsibilities, get a digital checklist of your required tasks, and have a place to store important information to help you keep organized, please visit Executor.org. The site covers everything you’ll need to know to settle an estate as quickly and easily as possible — and it’s 100% customized to your specific situation!
Have a question about executorship? Get an answer by sending an email to [email protected].
About the Author: Patrick O’Brien is CEO and co-founder of Executor.org, a free, comprehensive online resource that helps executors manage their responsibilities and duties in this complex role. The free tools include a helpful step-by-step interactive guide for executors and invaluable tips on everything from planning a funeral and keeping beneficiaries happy to dealing with grief and managing estate assets.