To take out a life insurance policy on someone else, you’ll need to prove to the insurance company that you have something called insurable interest. You can roughly translate that to “financial interest,” which means that you would need to prove that if the insured were to die, it would financially burden you.

Can you contest a beneficiary on a life insurance policy?

Any person with a valid legal claim can contest a life insurance policy’s beneficiary after the death of the insured. Often, someone who believes they were the policy’s rightful beneficiary is the one to initiate such a dispute. Only courts have the power to overturn a life insurance beneficiary.

Can a IRS lien on a life insurance policy?

If the deceased person owes money to the IRS, then that agency can legally file a lien on the estate and take the money prior to it being distributed by the probate court to the heirs. In this case, the IRS would definitely be able to take any funds that are added to the state by a life insurance policy.

Can a creditor seize a life insurance benefit?

When a person dies and a life insurance benefit is paid, a question that often arises is, “Can a creditor, such as the IRS, seize that money to pay a debt?” The answer to this question depends on two factors: the beneficiary and the owner of the policy.

What happens to life insurance if there is no beneficiary?

If there is no named beneficiary, the life insurance payout would go into the policy holder’s estate and would then be distributed according to their will, along with any other assets. Who gets life insurance if there is no beneficiary?

Can the IRS seize the proceeds of life insurance?

Finally, if the beneficiary owes the IRS, and receives life insurance proceeds, then the IRS can seize those proceeds just as it can any other assets owned by the debtor. The only way to prevent this is to have the money placed in a trust for the benefit of the beneficiary.