If you have a significant life insurance policy, it may be one of the biggest assets that you’re going to leave to the next generation of your family. You specifically took out that policy to ensure that they would be cared for and provided for after you’re gone.
But, do you need to use your estate plan itself to address this life insurance policy? For instance, does your will you need to tell your adult children how they should split up the money that they receive?
There shouldn’t be any conflicts
The biggest thing to keep in mind, if you mention your life insurance policy in your estate plan, is that there shouldn’t be conflicts between the two documents. If there are, the life insurance beneficiary designation is going to take precedence.
For example, perhaps you purchased the life insurance policy and then named only one of your children as the beneficiary. Your will may say that all of your children should split the money equally, but the life insurance provider is still just going to pay the full amount to the beneficiary that they have on file.
That said, there are some ways that you can incorporate your life insurance payout into your estate plan. For example, you don’t have to choose a person as the beneficiary, but you could choose a trust. This trust then determines how the fund should be distributed between your adult children after you pass away.
Setting up your plan
Decisions like this can be very complex and they are financially important to your entire family. Take the time to carefully look into your legal options to set up your plan appropriately.