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Can my life insurance and payable on death accounts go into trust?

On Behalf of | Jan 15, 2024 | Wills, Estates & Probate

As a Tennessee resident with life insurance or payable on death accounts, concerns about their fate upon your passing may arise. Will they smoothly transition to beneficiaries, or could probate and creditors’ claims complicate matters? The option of utilizing a trust to shield these assets and secure your family’s welfare may cross your mind. But, is that even an option?

Tennessee law safeguards for surviving spouses and children

Tennessee law extends protection to surviving spouses and children regarding life insurance and POD accounts, shielding them from the claims of the deceased’s creditors. Under the Tennessee Code, Section 56-7-201, if a life insurance policy lacks a named beneficiary, proceeds will be channeled to the estate, but remain immune to creditor claims when a surviving spouse or children are present.

A similar shield applies if the estate is the designated beneficiary. Further fortification emerges through Tennessee Code, Section 56-7-203, ensuring that life insurance policy proceeds, annuities and related cash values for the benefit of surviving spouses, children or dependent relatives are exempt from the claims of the deceased’s creditors.

Integrating trusts for enhanced control

For those seeking heightened control and flexibility over life insurance and POD account distributions, leveraging a trust is a strategic move. By naming a trustee as the beneficiary, individuals can dictate how proceeds benefit their chosen beneficiaries. Tennessee Code, Section 35-50-103, affirms the legitimacy of making life insurance payable to a trustee, emphasizing the trustee’s role as outlined in a trust agreement created during the policyholder’s lifetime.

Tennessee Code, Section 35-50-103, permits the designation of a trustee or trustees by will. Upon probate, the proceeds are channeled to the trustee(s) to adhere to the testamentary trust’s terms.

While utilizing trusts presents advantages such as probate avoidance, creditor protection and tailored distribution, it is crucial to weigh potential drawbacks. Costs and fees associated with trust creation and administration, potential loss of posthumous control and coordination challenges with other estate planning elements are factors to consider.


Navigating Tennessee’s legal landscape regarding life insurance and POD accounts involves thoughtful consideration of available options. Tailoring your approach based on specific family dynamics, financial considerations and long-term goals ensures a seamless and secure transfer of assets for the benefit of your loved ones.