Does life insurance pay for final expenses?
My nephew is the beneficiary of his grandmother's life insurance policy. Her will states from the beginning that all debts, funeral expenses and expenses from her illness to be paid first. Do those monies come from the beneficiaries amount as the will states that all debts are paid first? The will is from NJ.
Expert Answer
If, as is the most common situation, your nephew is the designated beneficiary of his grandmother's life insurance policy, upon her death, he has a right to the full proceeds of the policy. The only exception to this general rule would be if there were estate taxes due as a result of the grandmother's death, in which case, the proportionate amount of the estate tax that relates to the amount of the life insurance could be taken by the executor of the estate.
However, if, as is less common, the beneficiary of the life insurance policy was designated as the estate of the grandmother and her Will indicates that your nephew shall receive the proceeds of the life insurance, the debts and expenses of the grandmother would need to be paid first from all of the assets of the estate including the life insurance proceeds before any amounts are distributed to the beneficiaries of the Will.