Life insurance plays a valuable role in estate planning – not only can it be used to replace income if a “breadwinner” dies suddenly, but it can also help an estate pay its expenses, create liquidity for an estate that is heavily invested in real estate, or even create an estate where one might not have otherwise existed. One major benefit of life insurance – the proceeds avoid probate, allowing the funds to pass more quickly to the named beneficiaries of the policy.
But what good is a life insurance policy if the beneficiaries don’t claim it? It’s not by choice that they wouldn’t claim life insurance proceeds, but perhaps they do not even know the policy existed! Shockingly, hundreds of millions of dollars in life insurance benefits go unclaimed each year because beneficiaries don’t know about them. The money is eventually transferred to state unclaimed property divisions that profit from the money in the meantime. In fact, The New York Times recently reported that since 2000, New York has received over $400 million in unclaimed life insurance property.
The state does post the information regarding unclaimed property both online and in local newspapers. But the article goes on to detail the astonishing amount that remains unclaimed:
“New York has received $400,287,736 in unclaimed life insurance property since 2000 and paid out $64,772,228, said Vanessa Lockel, a spokeswoman for the Office of the State Comptroller. And that is just one part of the $10.5 billion the state has received in unclaimed property since 1943. Only about 20 percent of the property is claimed in any year.”
Make sure you have a conversation with your loved ones regarding your estate planning documents – giving them the “Who, What, Where, When and Why” can not only save your family from conflict upon your passing, but it can ensure that your family receives the inheritances that you intended.
The Law Office of Michael Robinson, P.C. is a member of the American Academy of Estate Planning Attorneys.