Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: Mar 19, 2020

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IRS Seize Life Insurance BenefitsThe IRS cannot seize life insurance benefits as long as a beneficiary is named. There are exceptions to this rule. When planning life insurance benefits, estates, trusts, living wills, and other end of life preparation this is a question that needs a detailed answer.

Nobody wants to work hard to establish a life insurance benefit only to have it go to the IRS or other creditors. The following article provides more information about when the IRS and other institutions can seize life insurance benefits and how you can protect your benefits.

It is important to understand when the IRS is allowed by law to potentially seize life insurance as well as some different ways that you can protect your life insurance policy from the IRS.

To learn when the IRS can seize benefits from a life insurance policy then read on. Also, be sure to enter your zip code above to get free quotes and find the best insurance!

When can the IRS and other institutions seize life insurance benefits?

If no beneficiary is named, or the named beneficiary is not of legal age, then the IRS and any institutions to which you owe money can seize life insurance benefits. It may seem strange to think that someone would not name a beneficiary on their life insurance policy, but it happens quite often. In most cases when this happens, it is a life insurance policy through work that is automatic, and the owner of the policy never finished the paperwork. Make sure to never leave the beneficiary section of a life insurance policy blank.

Be sure to name at least three beneficiaries on your life insurance policy in case the first or second cannot be the beneficiary for some reason including simultaneous death. For example, one spouse may name other spouse as the beneficiary on an insurance policy. If both spouses die simultaneously in a car accident or some other way, there needs to be another beneficiary. Without a beneficiary, any money included in a life insurance plan goes to the state. After taxes, the state will divide your money between your creditors.

Be careful, especially if you are helping an elderly relative plan their life insurance. There are an increasing number of credit card companies that hire people to call the elderly to try and pressure them into naming their credit card companies as the beneficiary on life insurance polices. This is illegal, but none the less, it is happening a lot. And some elderly can be made to feel like there is no other choice.

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How can you protect your life insurance policy?

You should never name a creditor as the beneficiary on a life insurance policy. You have to protect the final asset that you will be leaving to your family. Leaving your money in an estate leaves it just as vulnerable. An estate is subject not only to many different tax laws but it is also subject to creditors as well.

If you would rather go the estate route, leave your money in a trust with a named person to run that trust. The trust can then specify who gets money and how it is paid out. This is one way to protect your life insurance policy while still being able to assign the money as you would like it to be spent and distributed.

Another way to protect yourself is to never take a loan out against your life insurance policy. This is an option some life insurance companies make available at the time of the purchase of the policy. It may seem like a good option to borrow money against your life insurance policy if you need money, but the interest rate is usually triple what you could get through a traditional loan. The interest rate is high in order to prevent you from being able to pay back the loan before the life insurance policy is ready to be claimed. You will then have that much less to leave behind to your family in the event of your death.

It is important to know that each state has different laws pertaining to trusts, estates, life insurance plans, and beneficiaries. The most important way to protect yourself is to use a reputable insurance company and to consult a life insurance lawyer to look over your documents before you sign them. Be sure to look over your life insurance policy at least once every two years. Sometimes life circumstances change and you may want to name a different beneficiary or redistribute your money.

Finding the Best Life Insurance Rates

The best way to find a reputable life insurance company is to compare what different companies have to offer side by side. You can do this online through our free online comparison tool. Using our life insurance comparison tool gives you all the information you need to decide what life insurance company you want to use. Enter your zip code to start right now!