Example. Kirk and Lisa wanted to make their estate settlement simple for each other and for their three children. Knowing that assets in a revocable trust avoid probate, they created a trust and transferred their stock, home, LLCs into their trust. Kirk and Lisa "heard" that life insurance avoid probate because it's paid to the beneficiary. Kirk died. The insurance company immediately tells Lisa that the insurance company needs a probate court order. Why?
Many years ago, insurance agents would sell life insurance to a married couple. Because the insurance agent believed there would be some estate tax savings, the insurance agent wrote the insurance applications in a way that the husband would "own" the life insurance policy on the life of the wife, and the wife would "own" the policy on the life of the husband.
So, when Kirk died, it was determined that Kirk "owned" the policy on Lisa's life. When Lisa dies, the death benefit will be payable to Kirk (or Kirk's estate). In either case, Kirk's probate is necessary to collect the death benefit when Lisa dies. In addition, if the policy that Kirk owns has cash value, Lisa will not be able to access this cash value into the policy ownership gets transferred in a court proceeding.
Had they transferred their life insurance policy to their trust during Kirk's lifetime, the probate would not have been necessary. After Kirk died, Lisa, as the sole trustee, would be able to access cash value or change the beneficiary. But since they "assumed" that life insurance avoided probate, they ended up being required to complete Kirk's probate to "fix" the life insurance problem, even though all of their remaining assets avoided probate.