As people age, they think about what to leave behind for loved ones. A life insurance policy is part of estate planning, but it should be distinct from interchangeable with or a substitute for a will. A life insurance policy and a choice can work together to simplify the distribution of benefits after the policyholder dies.
Can I Use My Will to Distribute Life Insurance Death Benefit?
A life insurance policy allows you to name beneficiaries to receive a payout upon death. This money comes from the account you’ve paid into for many years and is not considered part of a will. In other words, you still need a choice if you’ve purchased a life insurance plan to distribute specific personal assets to beneficiaries.
Does My Life Insurance Need to Have the Same Beneficiary as My Will?
It’s optional for your life insurance policy and will list the same beneficiaries since they are two different plans. You can name multiple beneficiaries for each plan, which can be completely separate lists. You will also be able to distinguish between primary and contingent beneficiaries.
Is Life Insurance Part of My Estate?
After you die, a state court will determine the distribution of your assets if you do not have a will in place. A life insurance policy, by contrast, issues an immediate payout to beneficiaries upon your death, regardless of whether a choice is in place. It is not considered part of your estate by the IRS.
When Life Insurance Does Go Through Probate
Your life insurance policy can go through probate if your beneficiaries die before you do. In that case, the death benefit will be distributed according to your will. Lacking a will puts a state court in charge of what happens to your assets, which are typically divided among close family members.
Putting Life Insurance in a Trust
A key to gaining more control over what happens to your assets or how they are used after your death is to put your life insurance policy in a trust. In this process, you will name a trustee to oversee the distribution of funds upon your death.
Plan for Your Loved Ones with Medicare Advisors!
The greatest reason to get life insurance is that it provides financial benefits to the people you care about the most. For more information on buying life insurance, contact us here at Medicare Advisors. We look forward to helping you get the right coverage for your personal needs.