Ten years ago, your first child was born, and you realized it was time to think about the future. You decided to buy a life insurance policy and name your child as the beneficiary. This way, if anything unexpected happens to you, your child would have a substantial fund in their name.
But that was a decade ago, and you have since had three more children. Now you’re making a comprehensive estate plan, and you would simply like to divide the life insurance policy into quarters. Each one of your children should get 25% of the payout. Is it as simple as writing these instructions in your will?
The beneficiary designation
Writing these instructions in your will does not change how the money is handled. The life insurance policy itself already has a beneficiary designation. As noted above, this is your firstborn child. When you pass away, the life insurance provider will simply pay the entire balance to that beneficiary. It doesn’t matter if your will says something else, because the policy provider is not bound to follow your estate plan.
This means that you need to update the beneficiary designation. One way to do this would simply be to name all four of your children as equal beneficiaries, causing them to split the payout. Another option would be to set up a trust and name it as the beneficiary. You can then appoint a trustee and leave them instructions for how they should distribute the money between your children.
As you can see, it’s certainly important to start thinking about things like this in advance. Make sure you know what legal steps to take as you draft your estate plan.