IRS

Posted: Thu Dec 06, 2012 11:05 pm Post Subject:

Well, maybe you should forfeit your high school diploma for failing to write a grammatically correct question. Let's see if we can sort out what you really meant to ask.

It appears that what you want to ask is:

Will the beneficiary of my mother's life insurance policy not receive the death benefit when my mother dies because my mother owed money to the IRS?

If this is incorrect please let me know. The only other way to interpret question the way you wrote it is that the beneficiary owes money to your mother because of some problem with the IRS, but that doesn't exactly make sense. I cannot tell which you intended. But the answer is, essentially, the same either way.

First, it does not matter where anyone lives, Minnesota or Mexico. Second, life insurance proceeds are a "non-probate" asset. They pass to the beneficiary outside any claims a person, including the IRS, has against the estate of a deceased person.

While a person is living, their life insurance is protected against almost everything EXCEPT the Medicaid Spenddown Test. And even in that situation, it's the cash value that is at risk, not the life insurance itself. A person may voluntarily give up their insurance and use the cash as they choose, but they cannot be forced to do that other than as a qualification under Medicaid -- there can be no more than $1500 in life insurance cash value for a person trying to qualify for Medicaid.

Creditors, of either the insured, the policyowner, or the beneficiary, including the IRS, cannot get to the cash value, or make any direct claim against the death benefit while the insured is living, or prevent the death benefit from passing to a named beneficiary following the death of the insured.

When there is no named beneficiary is what causes all the trouble. In that situation, the money will pass to the estate of the policyowner (usually the same person as the insured) and then becomes subject to the claims of creditors, and the IRS would be at the top of the list, second only to an employee's claim for wages.

Posted: Fri Dec 07, 2012 12:49 am Post Subject:

The money will go to the beneficiary, but the IRS can come after a beneficiary when the estate of the deceased does not have enough in assets to pay what is owed.