Those who are interested in drafting or updating their wills often have life insurance policies. They see this insurance as just another way to plan for the future, just like the estate plan, and they want to do what they can for their families.
Now, there is one area where these two things overlap, and it’s in regards to who actually gets the money from the policy. You typically split up your assets in a will. You also pick a beneficiary by making that designation when you buy your life insurance policy. Which is more important?
The designation comes first
Both are very important, of course. But when they’re set against one another like this, the beneficiary designation carries greater importance. It will be honored before your will if there is a conflict between the two.
A common example is a parent who buys life insurance when they have one child, names that child as the beneficiary, and then has another child. Instead of updating the policy, they just update their will.
The issue is that your will divides your estate. The life insurance money is not part of your estate. It pays out to the beneficiary when you pass away. The company will simply use the person you named. Then, if your will tells them to divide the money with a sibling, they can decide if they want to or not. They’re not legally obligated to do so.
Making everything work together
A big part of estate planning is just making sure everything works together. You need to know how to craft a plan that accomplishes your goals.