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Thomas McJD
Thomas McJD, Attorney
Category: Estate Law
Satisfied Customers: 6516
Experience:  Wills, Trusts, Probate & other Estate Matters
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My mother recently passed away at the end of July. I am going

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My mother recently passed away at the end of July. I am going to be getting life insurance money and was wanting to know if creditors and or the IRS can take that money from me?

TMcJD :

Hi, I will be happy to assist you, and it is my goal to make you a very satisfied customer! This may take a few minutes, so thanks for your patience.

TMcJD :

The IRS and creditors - as in your creditors or your mother's creditors?

Customer:

mine

TMcJD :

Okay, thanks for the clarification. Give me just a few minutes to type out your answer for you. Thanks!

Customer:

ok

TMcJD :

Under section 1108.051 of the Texas Insurance Code, creditors cannot reach the proceeds of a life insurance policy. http://www.statutes.legis.state.tx.us/Docs/IN/htm/IN.1108.htm#1108.051

Customer:

Ok, so how do they know exactly that that money was from life insurance?

TMcJD :

You just keep it in a separate account by itself and show the deposit of the check into that account with no deposits from any other source.

Customer:

So just open a separate account just for that money?

TMcJD :

Yes, exactly.

Customer:

What about monies received from an IRA? Just roll those over into an inherited IRA or pull out the money and deposit into account as well?

Customer:

It is not that much from the IRA....$15K is all, due to it being split between siblings.

TMcJD :

Usually leaving those in an inherited IRA account is best but some states do not provide protection for IRAs and there is no federal protection outside of bankruptcy.

Customer:

So it would almost be worth me paying the 10% in taxes upfront, taking out the lump sum and putting the money in the bank account with the life insurance money?

TMcJD :

But TX appears to provide protection via Ins. Code section 42.0021

Customer:

Oh good

TMcJD :

Glad I could help. I would be grateful if you could please leave me a positive rating for my assistance. Thanks so much and have a great day!

Customer:

Thank you so much!! You were a great help...excellent! Have a great day :)

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