Don’t leave your life insurance death benefit to your estate.

Fred purchased a $1 million term life insurance policy after he married Mary, naming her as beneficiary. He did not name a contingent beneficiary. A year later, Mary gave birth to their son Jason. Fred did not update his life insurance beneficiaries after his son’s birth.

Tragedy stuck two years later, when Fred made a left turn and misjudged the speed of an oncoming vehicle. He and Mary were both killed in ensuing accident. Thankfully, Jason was at home with a babysitter.

What happened to the $1 million life insurance death benefit? Most assume Jason would get it, since Mary, the life insurance beneficiary, also passed away in the accident, and Jason was Fred’s only living heir. That would have been the case had Jason been listed as the contingent life insurance beneficiary. (Of course, it would have been much better if Fred’s life insurance beneficiary was his trust—see protecting your beneficiaries.)

However, injuries to the other vehicle driver led to a $1.5 million judgment against Fred’s estate for Fred’s negligence. Because Fred had no living life insurance beneficiary, the death benefit went to his estate, where it became subject to all claims against his estate. Although Arizona law generally exempts the life insurance death benefit from the deceased’s creditors, if the life insurance death benefit goes to your estate, it becomes an attractive and reachable target for any creditor. Even though Jason was the beneficiary of Fred’s estate, the creditors were able to take from the estate before Jason could. In the end, nothing was left for Jason.

Remember that if you have no living life insurance beneficiaries when you pass away, or if your beneficiary dies when you do, the insurance death benefit usually will go to your estate and be subject to an unnecessary probate and your creditors. To avoid these issues, confirm that you have primary and contingent living beneficiaries for your life insurance policies. Don’t make the same mistake that Fred made.