Not everyone buys life insurance, but those who do are trying to safeguard the future for their family. If something unexpected happens to them, they want to know that their family has that safety net. They can use the money from the insurance policy in many different ways.
However, there are those who still have a life insurance policy long after their children are grown up. They begin doing their estate planning, knowing that the value of this policy is eventually going to pass to their children. If you find yourself in this position, do you want to list your life insurance policy as part of your estate plan?
Life insurance beneficiaries take precedence
There are cases when you want to add your life insurance to your estate plan, such as if you didn’t name a beneficiary or if that beneficiary has previously died. In a situation like this, the policy might simply become part of your estate when you pass away. It needs to be discussed in the will so that your heirs know how to divide it.
However, if you didn’t name a beneficiary and that person is still alive to receive the life insurance payout, it no longer matters what you put in your estate plan. The beneficiary designation is going to take precedence. If the designation says that the money goes to one person and the will says that it goes to another, what you wrote in your will is going to be disregarded.
Financial situations like this can become difficult to sort out, but it’s very important to get things right. Be sure you understand what legal steps you’ll need to take.