Question

Austin owns a policy on the life of his wife Anna. Austin has not named a beneficiary because he thinks that if Anna predeceases him, he will receive the death benefit (as the policy owner), or his estate will receive the death benefit if he dies before Anna. When Anna dies suddenly, her creditors make a claim on the death benefit of the policy.

Which of these statements is true?

a) The death benefit of a life insurance policy is always creditor protected.
b) As the policy owner, Austin does not meet the statutory definition of a beneficiary. The proceeds are not protected from Anna's creditors.
c) As Anna's spouse, Austin qualifies as a preferred beneficiary.
d) As no beneficiary has been named, the proceeds will be paid to Austin's estate and are protected from Anna's creditors.

Answer 1

The death benefit of a life insurance policy is not protected from Anna's creditors since Austin did not name a beneficiary.

Step-by-step explanation:

The correct statement in this scenario is option b) As the policy owner, Austin does not meet the statutory definition of a beneficiary. The proceeds are not protected from Anna's creditors.

When someone purchases a life insurance policy, they have the option of naming a beneficiary who will receive the death benefit upon their death. In this case, Austin chose not to name a beneficiary. As the policy owner, he does not meet the statutory definition of a beneficiary. Therefore, when Anna dies suddenly, her creditors can make a claim on the death benefit of the policy.