A life insurance policy names the insured's spouse as beneficiary. At the insured's death, the proceeds:

Why A is correct

When a life insurance policy names a specific beneficiary, the death proceeds are paid directly to that person under the contract and generally do not become part of the insured's probate estate. This is one of the key advantages of beneficiary designations: the money passes outside the will, is not delayed by court administration, and typically avoids probate costs. Proceeds are subject to estate tax only if the insured held incidents of ownership and the value exceeds exemption thresholds, but they do not go through probate. The insurer pays the beneficiary directly upon proof of death and a completed claim form.

Why the other options are wrong

• B) Probate is triggered only when the policy has no living named beneficiary and the proceeds become payable to the estate. When a specific beneficiary is named, the proceeds transfer under the contract and do not require court-supervised administration.
• C) Creditors of the insured generally cannot reach life insurance proceeds that are payable directly to a named beneficiary. The funds pass outside the estate, and estate debts are satisfied from estate assets, not from beneficiary-directed proceeds.
• D) A valid beneficiary designation in the policy governs the payment of proceeds and overrides any conflicting provision in the insured's will. The will controls estate assets, but the life insurance proceeds go to the named beneficiary by contract.

Memory hook

Name a beneficiary = money skips the courthouse and goes straight to the loved one.