When your first child was born, it changed the way you thought about the future. You always wanted to make sure that you could provide for that child. As a result, you took out a life insurance policy. If anything unexpected happened to you, you knew your child would have a significant amount of money to ensure that their needs were met.
But that was decades ago. You’ve lived a long and happy life, and you’ve had more children. You’re now considering updating your estate plan as you near the end of your life, and you’re wondering if you should use it to split that life insurance policy between all of your children. They were not born when you originally purchased it, so they are not listed. Is an update necessary?
Update the beneficiary designation
It is important to update your paperwork at this time, but you do not need to update your will. Instead, you need to update the beneficiary designation on the life insurance policy itself. You can add multiple beneficiaries, or you could use that designation to make the payout part of your estate plan – such as setting up a trust that will be the beneficiary.
But if there’s a discrepancy between the two, the life insurance designation takes precedence. For instance, your estate plan could tell the estate executor to divide the total of the life insurance payout between all three of your children. But if only your firstborn child is listed, they will still get 100% of the payout from the life insurance company. The estate executor is not involved because the money isn’t part of your estate.
There are some complex ways in which different types of estate planning interact. It’s always important to know what steps to take and what legal tools you have at your disposal.