If you’re making an estate plan and you have a life insurance policy, you do not necessarily need to include it in the plan. Understandably, this is a major asset. Many people think that they need to mention it in their will or discuss how they want the money to be split up between their heirs. But it is likely that the life insurance policy is going to circumvent the will and so that wouldn’t apply.
The thing to remember is that the life insurance policy already has a beneficiary. You should have named one when you set it up. When you pass away, the company pays the money to this beneficiary. This may seem like a technicality, but what it means is that the money never actually enters your estate. It does not need to go through probate, and it is not bound by any of the specifications in the will.
Why could this get confusing?
For example, say that you had one child and you bought a life insurance policy. You assumed that you would live as long as your spouse, so you named your child as the beneficiary on the policy. But, when you were making your will, years later, you had three children. You decided to simply write into the will that the life insurance should be split up evenly between the three of them.
Certainly, your firstborn child can share that life insurance policy with his or her siblings. Expressing your wishes is not pointless. But it does not create a legal obligation for that child to share the money. Things can get complicated because the other two children may think that they deserve a portion of that policy, but the life insurance company is simply going to pay 100% to the beneficiary you named.
As you can see, estate planning is often far more complicated than people assume. Be sure you know exactly what legal options you have.