One way to provide for your heirs is to buy a life insurance policy. You will leave them all sorts of other assets as well, but the life insurance is money you know they’re going to get at a time when they need it. In this sense, it is part of the assets you are leaving behind.
However, you generally do not need to put your life insurance into your will, nor should you. The will often will not have any impact on what happens to it, and having a will that is different than the policy itself could create disputes among your heirs.
What does happen with that insurance payment?
When you buy the insurance, they’re going to ask you who you want the beneficiary to be. You then designate someone to get the money, and you provide the life insurance company with the information needed to pay that out.
If you change your mind in the future and alter your will, you may think that’s good enough, but it’s not. The life insurance company is still going to follow the instructions you originally gave them and pay your beneficiary. That designation takes precedence over anything else.
Why would this cause problems for your heirs? Say you had two kids when you bought the policy, and you named them as the beneficiaries since you were divorced. You later got married, and your new spouse has two kids of their own.
If you put in your will that all four children should split the money, the insurance company doesn’t have to follow that. They just pay your initial beneficiaries, who then get to decide if they want to share the money with their step-siblings or not. The way to get around this is to update the beneficiaries on the plan itself, but just updating the estate plan isn’t enough.
Creating your plan
This is just one thing to consider as you work to create the ideal estate plan for your family. Take the time to look into all of your options and the steps you’ll need to take.