How to Use Probate for Annuities With No Beneficiary
Purchasing an annuity lets an investor avoid probate and leave a cash inheritance for the beneficiaries. However, if no beneficiaries are listed or if the beneficiaries are dead, you may have to open an estate to distribute the proceeds. In this case, the balance of the annuity is included with the decedent’s estate. Before beneficiaries can receive their share, the court has the right to use the annuity funds to pay the decedent’s bills. If the decedent’s bills exceed the available assets, the beneficiaries receive nothing from the annuity proceeds.
Contact the Annuity Company
You may be able to avoid probate even though there are no listed or living beneficiaries. Many annuity companies have a contract clause that identifies who inherits the proceeds if beneficiaries aren't named. This clause takes affect once the annuity buyer signs the contract, and it allows you to circumvent probate. Because the annuity contract is a legal document, the courts will not interfere with the annuity proceeds distribution.
Open the Estate
If no beneficiaries are listed, you must open an estate before the annuity company will release the proceeds. Once the estate is open, the court can appoint you as the personal representative and issue letters of administration. The letters of administration give you the right to transact business on the estate’s behalf. Along with the letters of administration, you must have a certified copy of the decedent’s death certificate and have the annuity contract number and information. Once the annuity company has this information, it can verify the existence and identity of any beneficiaries.
Gather the Proceeds
You must file a death benefit claim form before the annuity company can transfer the proceeds to the decedent’s estate. You can find the claim form on the annuity company’s website, or you can ask that the company send it to you. The annuity company starts processing the benefits claim once it receives the documents. Since the payment is made payable to the decedent’s estate, you must have an estate bank account open to deposit it. In the meantime, you must include the annuity proceeds amount with the accounting that you file with the court.
Distribute the Funds
When the proceeds payment arrives, you must deposit it into the estate bank account. The money remains in the account until the decedent’s debts are settled. After that, the proceeds are distributed according to the decedent’s will. For example, if the will calls for the assets to be evenly shared, all named beneficiaries receive an equal amount. If the decedent died without leaving a will or a trust, the annuity proceeds are distributed according to that state's law. Once the court receives confirmation that the annuity proceeds are distributed, you can file the documents to close the estate.
Based in St. Petersburg, Fla., Karen Rogers covers the financial markets for several online publications. She received a bachelor's degree in business administration from the University of South Florida.