When setting up an estate plan, one thing to consider is how all of the documentation works together. Certain conflicts can cause problems for the beneficiaries.
For example, when setting up a life insurance policy, a person is asked who they want to name as the beneficiary. They make this beneficiary designation with the life insurance provider.
However, a person’s will could, theoretically, give different instructions. Perhaps the life insurance policy says that the total payout should go to one child, for example, because the policy was purchased when that individual only had one child to name. Over time, their family grew, so their will says that the life insurance payout should be split between all of their children. Which one takes precedence?
The life insurance beneficiary designation
In most cases, the designation made on the life insurance policy will take precedence over other estate planning documentation, such as a will.
In the above example, this means that the oldest child would receive the entire payment. Their siblings would not receive anything, even though it was allotted to them in the will. Since the life insurance policy pays out when the person passes away, it is not part of their estate and does not get split up by their estate plan.
Naturally, this can cause significant conflict. The other children may note that their parent clearly wanted the money to be split, while the oldest child says they have no legal obligation to do so. This is why it is so important to consider all types of documentation and assets when creating a comprehensive estate plan, and an experienced estate planning attorney can assist.