Your life insurance beneficiary is simply the person who gets the money if you pass away and the policy pays out. When you buy the policy, they’ll ask you to name a beneficiary and you can pick whoever you want at that point.
Now, if you did this a long time ago, you want to make sure it’s still accurate. If it’s not, the money could go to someone who is no longer in your life. For instance, if you got divorced and your ex is still named on the form, they’re going to get your money, rather than your children or other family members.
From an estate planning perspective, you may decide that you will simply write who should get the money in your will. After all, the will is legally binding. Isn’t that good enough?
It’s not. A will can be legally valid and it can say who gets the payout, but the beneficiary named on the life insurance paperwork takes precedence over it. In other words, if the two give conflicting instructions, it is the beneficiary designation that wins out, not your will.
One simple way to tie the two together is to set up a trust that the life insurance pays into when you pass away. You can then have the trust distribute the money to whoever you want, and you can update the trust with the rest of your estate planning documents. If the trust changes, so will the distribution, even if you never touch the life insurance paperwork again.
No matter what you decide to do, just make sure you know exactly what legal steps you will have to take. An experienced estate planning attorney can help you better understand what you can do to make your plans fit your goals.
