A will is perhaps the most basic part of an estate plan, giving you the power to quickly and simply divide assets between your heirs. You can use it for cash assets, sentimental items, collections, real estate and much more.
But what about a life insurance policy? If you have life insurance, that payout may form a major portion of your estate. To split the money up between your heirs, can you just put instructions in your will?
The beneficiary designation is what really matters
What you need to remember is that beneficiary designations tell the life insurance company where to send the money. Your will won’t change that. If there are differences between the two, the company is going to follow the designations you have given them, not your will.
This can be problematic in situations where you forget to update that designation. Say you had two children when you bought the policy and you named them both as beneficiaries with an equal claim. Later, you had a third child. If you do not add that child to the paperwork, he or she will not get any of the money and the other two heirs will not be legally required to share it, even if your will says that you would like them to.
This doesn’t mean they won’t. They can choose to do what they want. But it means there’s no obligation.
Creating a plan that works
You need to think about details like this when creating an estate plan so that you know it will really work for your family.