Your life insurance policy beneficiary designations and your instructions in your will need to match. If they’re at odds with one another, your will isn’t going to actually have any impact on how the money from the insurance is paid out. The life insurance company is simply going to look at the instructions that they were given when you created the policy.
For instance, perhaps you have two children and your will just says that they should take all of your assets and split them evenly in half. This seems very simple to you and you don’t think there will be a dispute.
However, your life insurance policy only names your older child as the beneficiary. You assume they have to split that policy in half because that’s what the will says, but the policy is technically going to pay out first. This means that your older child will get half of all of your other assets and 100% of your life insurance policy. Needless to say, this can lead to disputes in a lot of confusion, not to mention the fact that your actual desires for the situation will not be honored.
So what can you do?
The best thing you can do to avoid a scenario like this is to plan ahead. You do have options that you can utilize to make sure your money goes where you want. The simplest way may be to update your beneficiary designations, but you could also consider something like having the life insurance policy pay into a trust and then having the trust distribute assets to your heirs.
There are options, so just make sure you consider them carefully and understand what steps to take to get the estate plan that you want.