If you have a life insurance policy, you may be counting on that money to leave your family members a significant inheritance. Even if you do not have other significant assets, you know that they are going to receive a payout from the life insurance company, and you intentionally bought it to give them financial security after you pass away.
When you buy that policy, the life insurance company will ask you to name a beneficiary. It is important to keep in mind that this designation often takes precedence over anything that you have written in your estate plan. This is why it is helpful to make sure that all of your documentation matches.
Problems this could create
If there are differences in the documentation, it can lead to some significant conflicts.
For instance, maybe you were a young parent when you bought the policy, and you only had one child. You named them as the beneficiary. Later on in life, however, more children were born. In your estate planning documentation, you have indicated that all of your children should split the life insurance payout evenly.
Even if that is what you intended, the life insurance provider is not bound by your estate plan. They are likely just going to pay the full amount to your named beneficiary, which is your eldest child. This can lead to conflicts with other siblings who believe they are entitled to a portion of that money.
Setting up your estate plan
This is just one potential conflict to be aware of. As you create all of your estate planning documentation, take the time to look into the legal details carefully.