What happens to my spouse’s life insurance policy?
November 14th, 2014 by Questions
If a spouse of a bankrupt person passes away.
Does the trustee take all the proceeds from the life insurance to cover the debt the bankrupt person owes, even though the spouse had paid the premium for the policy for over 30 years
Posted from: Ontario
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November 14, 2014 at 10:18 am, Doug Stuive, CA | Trustee | CIRP said:
In order to answer that question it is important to know whether it is yourself or your husband that is bankrupt. Also, it is important to know who the beneficiary is for the life insurance policy in question. It would also be necessary to understand whether the bankrupt person is discharged from the bankruptcy and whether the trustee is discharged from the bankruptcy. All of these factors affect whether a trustee is able to receive the proceeds from an insurance policy.
In general, if it is the bankrupt that is deceased and the proceeds of the policy are payable to his estate the Trustee would have an interest. If the proceeds are payable to a member of his immediate family they are exempt from seizure by the Trustee. (with the exception of siblings)
If the beneficiary of the policy is bankrupt, the proceeds payable to the beneficiary would be considered after acquired property and the trustee would be able to seize the proceeds.
If you are worried about this happening it would be a good idea to discuss the matter with your trustee. They can confirm whether the policy is exempt from seizure by the Trustee specifically relating to the bankrupt estate in question.