One of your biggest assets is your life insurance policy. You know that life is unpredictable, but you wanted to ensure that you could provide for your family. So, when you and your spouse had your first child, you bought that life insurance policy and named your child as the beneficiary. If something happened to you, they would have a substantial amount of money coming their way.
But that happened decades ago. Now you’re much older, you have more children, and you’re working on your estate plan. That life insurance policy is still valid and is going to pay out eventually. But now you want to divide it between multiple beneficiaries. Can you use your will to do this?
Will the life insurance enter your estate?
Generally speaking, no, you can’t use your will to divide a life insurance policy. The issue is that the policy never enters your estate. Once you pass away, the life insurance provider pays the beneficiary that you’ve named. This all happens independently from the rest of the asset division process. Even if your will says that a single beneficiary is supposed to share the money with their siblings, they are not legally obligated to do that. You would need to update the beneficiary designation.
There are some exceptions, though, where a life insurance policy will enter someone’s estate. One example could be if a beneficiary passes away before the policyholder and the designation is never updated. Another example could be if the beneficiary is actually a trust, which will then hold the money and distribute it to multiple beneficiaries.
In other words, these situations can be complex and unique. To ensure that you accomplish your estate planning goals, take the time to carefully consider all of the legal options at your disposal.