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Should your life insurance be divided by your will? 

On Behalf of | Nov 6, 2023 | inheritances |

Many of the assets you own can be divided in your will when passing them to the next generation. Say that you are splitting all of your assets between three direct heirs, who are your children. You can use the will to specify division percentages for financial accounts or to give certain assets directly to certain people – such as leaving the home to one child, the vacation property to another, and the family business to the third.

But what about your life insurance policy? It may be one of the most expensive assets that you own, and you definitely want the money to go to all three of your children. Should you just write in your will that they have to divide it evenly between the three of them?

Naming 3 beneficiaries

There’s actually a much better way to do this, which is to name all three children as equal beneficiaries on the life insurance documentation. You don’t need to put it in your will at all. You just need to update the beneficiary designations with the life insurance company.

The reason for this is that your life insurance is technically not part of your estate. When the insurance company pays out, you will already have passed away. They just directly pay the beneficiaries that have been named on their end. Since the money is not in your estate, it isn’t governed by your will and the life insurance company doesn’t have to follow it. If you only named one child as a beneficiary, for instance, they would get the entire payment – no matter what your will said.

This is just one area where estate planning to be complicated. Those involved need to understand all of their legal options.