Couple discussing life insurance with an attorney

Although there are federal laws governing life insurance policies and the procedures for collecting life insurance proceeds, each state has its own unique laws as well, so it is important for beneficiaries to familiarize themselves with the laws of the state in which the proceeds of the policy are to be collected. If you have questions regarding collecting life insurance proceeds in Minnesota or Florida, reach out to Roulet Law Firm, P.A. by calling our Minnesota office at (763) 420-5087 or our Florida office at (941) 909-4644.

Life Insurance Payout Rules

Life insurance companies typically require their customers to name at least one beneficiary when they take out the policy. When the policy holder dies, the beneficiary or beneficiaries they named will be eligible to collect the proceeds of the life insurance policy. Common examples of life insurance beneficiaries include:

  • An individual, often a relative or close friend
  • A business
  • A trust
  • Other organizations, such as charitable not-for-profit entities

Once the policy holder passes away, the insurance company will be required to pay these beneficiaries directly. Because the funds disbursed in the payout of a life insurance policy are not considered a part of the decedent’s estate, creditors will typically not be able to claim the funds to settle any debts.

How Are Life Insurance Proceeds Distributed in Florida?

When a person who holds a life insurance policy dies, the insurance company will be required to locate and pay the beneficiary named in the policy. If the first named beneficiary has also passed away, or if the designation is for some reason invalid, in many cases there will be a provision for a secondary, “backup,” beneficiary, often known as the contingent beneficiary. In these instances, the insurer will need to try and locate this alternate beneficiary.

If neither the original beneficiary nor the contingent beneficiary is available, the insurer can proceed with paying the benefits to the insured’s estate if this option is permitted under the terms of the policy. In these situations, the insurance proceeds will likely be distributed with the rest of the estate according to the instructions left in the insured’s Last Will and Testament. If the insured did not have a Will, then the estate, including the insurance proceeds, would be distributed according to Chapter 732 of the Florida Statutes, which governs intestate succession.

Life Insurance Rules in Minnesota

Life insurance in Minnesota works on a simple principle: The policy owner pays premiums throughout their lifetime, and when they pass away, the insurance company will make payments to the designated beneficiary or beneficiaries listed in the policy. Per Chapter 61A of the Minnesota Statutes, the payments must be processed within two months after the insurance company receives proof of the insured's death.

Is Life Insurance Taxable in Minnesota and Florida?

Not surprisingly, many life insurance beneficiaries have questions about whether and how the life insurance proceeds to which they are entitled will be taxed. In most states, under most circumstances, a life insurance payout is not likely to be taxed as part of the beneficiary’s income; however, it is important for both policy holders and beneficiaries to be aware of some potential exceptions to this general rule.


In Minnesota as in most other states, insurance proceeds are generally not taxable income for beneficiaries. This means that the policy’s beneficiaries will not usually have to worry about paying fees on the money they receive. However, taxes may be owed:

  • If interest is accrued on the life insurance proceeds
  • If these insurance proceeds go into a taxable estate
  • If the total inherited assets are above a certain amount

This list does not indicate every time when life insurance proceeds may be taxable. To learn more about insurance proceeds and the taxes that may be applicable in your situation, consider reviewing your specific questions with the legal team at Roulet Law Firm, P.A.


In Florida, the insurance proceeds that pass to the beneficiary from a life insurance policy are tax-free. However, any amount above these proceeds, such as interest accrued on the sum of the policy, would be taxable as income at regular interest rates.

Life Insurance May Be Subject to Estate Taxes

It is important to not though, that while the proceeds of a life insurance policy are not taxable to the beneficiaries, the policy may be subject to estate taxes in your estate. Everything you own at the time of your death, including the value of life insurance policies, is includable in your estate to determine whether or not you are subject to the estate tax. So even though the policy proceeds may be paid directly to your spouse and/or kids upon your passing and is not taxable to them, because you owned it when you passed, the proceeds are included in your estate for estate tax purposes. So if the total value of your estate, including the value of life insurance policies you own, is above the state and/or federal estate tax exemption, then your estate will be subject to estate taxes.


Minnesota has a separate, state-level, estate tax. So if the total value of your estate, including the value of your life insurance, is above that threshold, the policy proceeds will be subject to estate tax.


At the time of this article, Florida does not have a separate, state-level, estate tax.

Federal Estate Tax

At the time of this article, the federal government levies an estate tax. However, the exemption amount changes frequently.

Planning to Minimize or Avoid Estate Taxes

If you would like to minimize, or even avoid, estate taxes on your life insurance and other assets, call us today to schedule a meeting. There are a number of planning strategies, including the use of an irrevocable life insurance trust “ILIT”, that can be used to save on both state and federal estate taxes.

Can Children Receive Insurance Benefits Directly?

Most states place limitations on children’s ability to inherit financial assets directly, so in many cases a life insurance policyholder who wishes for their minor child to inherit their life insurance proceeds will name a trust as the beneficiary of the life insurance policy and their child as the beneficiary of the trust. Another popular option is for the policyholder to use their Last Will and Testament to name a guardian for their minor child and include instructions for how the guardian should manage any assets, including life insurance proceeds, on the child’s behalf.


Minors in Minnesota cannot receive life insurance proceeds directly. Individuals wishing for young children to benefit from the proceeds of their life insurance policies may wish to speak with an estate planning attorney to discuss the best options for their situation, taking into consideration the age of the child or children and whether any other assets, besides the life insurance payout, will also need to be addressed.


In Florida, children cannot receive insurance proceeds directly. If a policyholder designates their son or daughter, or any other minor, as a beneficiary, and then passes away before the child turns 18, Florida’s probate court will likely need to name a guardian to take control of the money and use it for the child’s benefit. Because probate courts are often tightly limited in the individuals they can consider for guardianship, parents in particular may wish to consider naming a guardian in their estate planning documents instead.

How Do Life Insurance and Estate Planning Go Together?

While it may not be obvious, life insurance can play a significant role in estate planning in Florida and Minnesota. Moreover, owning a life insurance policy offers several benefits beyond just providing a lump sum to your loved ones. Take, for instance, the following:

  • The proceeds from the life insurance policy can help pay off debts, funeral expenses, burial expenses, and final income taxes.
  • The proceeds from the life insurance policy can help pay estate taxes.
  • The proceeds from the life insurance policy can provide a tax-free inheritance.
  • The proceeds from a life insurance policy do not have to go through probate as long as they are paid to a trust or have a beneficiary listed on the policy.
  • The proceeds of a life insurance policy can help split assets equally between heirs. This can be especially beneficial for individuals who have investments that are challenging to divide, such as real estate.

In addition, if you own a business and have a partner or multiple partners, having life insurance and combining it with a buy-sell agreement can help make sure your family will be compensated fairly for your share of the business if something should happen to you in the future. To better understand all these benefits, consider speaking to a knowledgeable estate planning attorney who can explain how life insurance can help with your estate planning.

Contact the Roulet Law Firm, P.A. Today for More Information Regarding Life Insurance Proceeds

Life insurance policies are bought with the intent of safeguarding families from financial difficulties that may arise in the wake of death, and to give policyholders a chance to leave their loved ones a truly unencumbered gift. These policies help to ensure that dependents do not suffer financial as well as emotional distress, and that they can continue to lead a comfortable life in the absence of the policyholder. Life insurance policies can also be used to facilitate the smooth functioning of a business in the event of the loss of a partner. To learn more about the laws surrounding life insurance proceeds in Minnesota and Florida and how to use these benefits to secure your estate planning goals, contact the Roulet Law Firm, P.A. today by calling our Florida office at (941) 909-4644 or our Minnesota office at (763) 420-5087 to schedule a consultation to review your life insurance and estate planning needs. Or, fill out the contact form on this page and a member of our team will reach out to you to schedule a consultation.

If you would like to learn how to make it as easy and inexpensive as possible for your family to manage your affairs during incapacity and after passing, while ensuring your assets only go to whom you want and how you want, click here to register for our FREE online masterclass.

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Chuck Roulet
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Nationally Recognized Estate Planning Attorney, Author, and Speaker
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