Your will and other estate planning documents determine what happens to your property after your death. It is a smart idea to frequently review and update your estate plan. As your family changes and your financial circumstances evolve, your wishes will change as well.
If you have a will or a trust that outlines the distribution of your property following your death, any estate planning updates will likely target those documents specifically. You can work with your lawyer to make some changes to who receives certain property or what assets you include in the plan.
If you update your estate planning documents, it is very important that you make sure they are in alignment with your life insurance paperwork. Otherwise, the administration of your estate may not work out the way you think it will.
Your beneficiary designations hold all the power
When it comes to life insurance proceeds, your estate plan isn’t what’s most important. While you may talk about the use of proceeds from your insurance policy in your will or trust documents, it is the policy paperwork that matters the most.
When you first purchase the policy or renew it, you have to indicate the beneficiary who should receive the proceeds from the policy. It is common practice for people to name their spouses or children as their beneficiaries for their life insurance. However, if you divorce your spouse or experience estrangement from your children, your preferences about who receives your life insurance payout may change.
You need to make sure that the policy documents match whatever arrangements you established in your estate plan. Otherwise, a contradiction between those documents will likely cause estate administration issues. The beneficiary designations are ultimately what has authority, not the will or trust documents you created.
If your insurance policy is out-of-date, the wrong people might inherit from your estate. Occasionally looking over your life insurance policy is a good practice anyway. As your circumstances change, you may want to consider adjusting the coverage in addition to updating the beneficiaries you named.
Creating and maintaining thorough estate plans helps protect you and your loved ones as you grow older.