Understanding Life Insurance Beneficiary Designations
When someone names you as the beneficiary of a life insurance policy, that designation applies only to the policy itself. Life insurance proceeds pass outside probate in North Carolina. The proceeds go directly to the named beneficiary under the contract terms. They do not form part of the decedent’s probate estate.
Probate property includes assets that must go through the court process. Non-probate transfers avoid probate. Under N.C. Gen. Stat. § 28A-2-2, assets with designated beneficiaries—like life insurance policies—pass outside probate. You receive the policy proceeds without waiting for probate distribution. To learn more, see N.C. Gen. Stat. § 28A-2-2.
While you inherit the insurance proceeds, you do not inherit other assets automatically. Assets such as real estate, bank accounts, and personal property fall into the probate estate. Those pass through probate under a will or, if there is no will, under North Carolina intestate succession rules in N.C. Gen. Stat. § 29-14. See N.C. Gen. Stat. § 29-14.
If the decedent had a valid will, the personal representative distributes probate assets according to that will. If there was no will, the court appoints an administrator who follows intestacy laws. Being a life insurance beneficiary does not make you the personal representative. It does not entitle you to control or claim other estate assets.
You can disclaim your interest in an insurance policy. North Carolina allows disclaimers under N.C. Gen. Stat. § 28A-8-3. The disclaimer must meet strict requirements and deadlines. If you disclaim, the proceeds go to the next beneficiary or to the estate if no alternate beneficiary exists. More on disclaimers: N.C. Gen. Stat. § 28A-8-3.
Creditors generally cannot reach life insurance proceeds payable to a named beneficiary. However, if the beneficiary is also the decedent’s estate, creditors may make claims. In limited cases, a court may order payment of certain expenses from the insurance proceeds. Always review your policy terms and seek guidance if creditors contact you.
Key Points to Remember
- Beneficiary designations apply only to the policy, not to other estate assets.
- Life insurance proceeds pass outside probate under N.C. Gen. Stat. § 28A-2-2.
- Other assets go through probate and distribute by will or intestate succession under N.C. Gen. Stat. § 29-14.
- You do not become personal representative by being a beneficiary.
- You may disclaim benefits under N.C. Gen. Stat. § 28A-8-3, following strict rules.
- Creditors generally cannot seize proceeds payable to a named beneficiary.
If you have questions about your role as a beneficiary or about administering an estate in North Carolina, turn to Pierce Law Group. Our attorneys guide you through probate, asset distribution, and beneficiary issues. Contact us at intake@piercelaw.com or call (919) 341-7055 to discuss your case.
