When navigating the intricate web of estate planning, it's easy to get tangled up in a few misconceptions. One common myth we hear frequently? That your life insurance payout is governed by your will. Spoiler alert: it's not! Let's break it down.
The Lowdown on Life Insurance
Life insurance is a contract between you and your insurance company. You pay premiums, and in return, the insurance company agrees to pay out a specified amount to designated beneficiaries upon your passing. Life insurance payouts typically occur relatively quickly after the insurance company is notified of the death. Simple enough, right?
Beneficiary > Will
Now, here's where it gets interesting. The beneficiary (or beneficiaries) you name in your life insurance policy is King or Queen of the castle. They reign supreme. So, no matter what your will states, the life insurance payout will go directly to that named beneficiary.
For example, let’s say you bought a life insurance policy years ago when you had just one child, Rebecca. You named Rebcca as the beneficiary of the policy. Ten years and 2 kids later, you finally get around to doing your will. You specifically state in your will that everything is to go equally to your three kids. Unfortunately, “everything” doesn’t include life insurance! Rebecca is going to get 100% of the life insurance, and your other children will get nothing.
Points to Ponder
If you're considering using life insurance as a tool in your estate planning strategy, it's essential to keep the beneficiary information updated. Life happens. Marriages, births, deaths – all these can influence who you want as your policy's beneficiary. Regularly reviewing and updating this information can save a lot of heartache and confusion down the road.
Get Started Today
Wills are undeniably a cornerstone of estate planning. However, it's crucial to remember that not every asset is controlled by your will. Ready to get started on your own estate plan? Our process is simple. Start by booking a Peace of Mind Planning Session. You’ll share your goals and objectives, and we’ll present your options and our unique flat fee pricing. Book by Sept. 30, 2023 and mention this blog post, and we’ll waive the $350 session fee.