If a person died owing the IRS, can it take the proceeds of the deceased’s life insurance policy?

UPDATED: Sep 29, 2022

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If a person died owing the IRS, can it take the proceeds of the deceased’s life insurance policy?

My aunt passed and has no living relatives but myself. She had a life insurance policy but did not name a beneficiary. Per the policy, I am able to claim it but my aunt owed the IRS. Is the IRS entitled to it or can I claim it without repercussions? I have paid off all other debts to avoid probate and discovered this policy after the fact.

Asked on November 3, 2015 under Estate Planning, Arizona


M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

If a beneficiary had been listed on the policy, then that person would have been paid the proceeds directly; the proceeds would not have been an asset of the estate. However, since no beneficiary was so named, the proceeds are now legally an estate asset. Accordingly, before they can be paid out to any beneficiaries/heirs, all debts of the estate must be extinguished. Therefore, as a creditor, the IRS debt must first be paid off.

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