Your life insurance policy is set to make a substantial payment to your adult children when you pass away. You purchased the policy when your first child was born, knowing it was an easy way to provide for them in the future. This may be the most valuable asset that you own, so it is a substantial consideration as you look at your estate plan.
Since you originally purchased the life insurance policy, you have had more children. You would like to include them by dividing the life insurance payout equally between them, rather than leaving it all to your firstborn child. Should you simply put these instructions in your will?
You need to update the beneficiary designation
Putting these instructions in your will isn’t enough, in most cases. You need to contact the life insurance provider and update the beneficiary designation, as well. The problem with neglecting to do this is that the designation takes precedence if there’s a conflict between the two.
Imagine that your will states that the money should be split three ways, between your three adult children, but only your eldest child is named as the beneficiary. The life insurance provider is going to ignore your estate plan and pay the beneficiary the total amount from the policy. Since that payout isn’t part of your estate – it goes directly to the beneficiary – it doesn’t matter that your will gives other instructions. The insurance provider is not obligated to follow them, nor is the beneficiary.
If you want to avoid disputes and conflicts, it’s quite important to plan for things like this in advance. Be sure you know exactly what legal steps you’ll need to take.
