Insurance Proceeds and Payment for Funerals

After a person dies, one of the first things a family has to consider is planning for the person’s funeral.  Since funerals and burial services typically cost thousands of dollars, unfortunately, the next consideration quickly becomes how the funeral and burial will be paid for.  In most cases, loved ones usually try to determine whether the deceased person had an insurance policy to pay for his/her own funeral.  However, for several reasons, using insurance proceeds is not always the quick and easy solution to paying for funeral and burial expenses.

Although it would seem to be a good idea to purchase insurance that will be payable directly to a funeral home and/or cemetery upon a person’s death, in reality, very few people purchase such insurance.  It is much more common for a person to purchase a separate life insurance policy, payable to a close relative or friend and then to notify such friend or relative that he/she wants the funds from the policy to be used to cover the cost of their own burial/funeral.  In this typical situation, most people are not aware that even if the deceased person clearly states (in writing) his or her desires to have the proceeds used to pay for the funeral and burial expenses, the beneficiary of the policy has no legal obligation to use the proceeds in the way the deceased person requested.

While it is also typical for the beneficiary of the insurance to sign over his or her rights to the proceeds of a policy to a funeral home and/or cemetery, that does not always happen. When a beneficiary decides to keep the proceeds of a policy, the relatives of the deceased person have no legal recourse against the beneficiary because the beneficiary, and not the deceased person’s estate, is the owner of the proceeds.  Thus, relatives would have to pay out-of-pocket for funeral and burial expenses they may have assumed had already been paid for.

Moreover, even if the beneficiary decides to provide payment for the funeral and burial expenses from the proceeds of the policy, because the beneficiary is the true owner of the proceeds, he or she has the right to be reimbursed from the deceased person’s estate and has a priority claim to such reimbursement before payments are made to creditors and heirs/legatees of the estate.

For more information or for a consultation regarding your legal issues, please contact McCollum & Associates, LLC, at (301) 864-6070 or