Life insurance may play a major role in your estate plan. You want to make sure that your policy pays out to your heirs, who can then use it to cover costs or just view it as an inheritance.
That’s fine, but remember that your life insurance policy stands on its own in some very important ways. It is a separate part of your estate plan, which is not influenced by your will.
Deciding who gets the money from the life insurance policy
Perhaps the most important way that this plays out is that the beneficiary designation determines who is going to get the money from the policy. Your will does not. Therefore, changing or updating the will doesn’t actually update what happens with your policy, even if it’s the largest asset that you have.
For example, maybe you adopted a child after getting the policy. The beneficiary designation is your biological child, who was born first. Naturally, you want both adult children to split your life insurance policy equally, as their inheritance.
If you update the policy itself to name two beneficiaries, you can do this. If you just update your will to tell your children to split the proceeds, the policy still only pays out to your biological child. They are not legally obligated to split it in accordance with your will. They may, but they don’t have to, which can cause confusion and strife.
Creating an estate plan that works takes effort
You need to consider things like this when looking into all of the estate planning options you have to create a plan that really works well for your family. An attorney can help you explore your choices.