To ensure that your family can access the death benefit of your life insurance and total assets, you name a beneficiary in the policy and your will. This is an important process to ensure your loved ones are financially secure after death. However, you must understand that these are two separate components, and either cannot be used as an alternative to the other.
Keep reading to discuss the scope of your life insurance policy and your final will to enable you to understand how they can benefit your family in your absence.
Can I Distribute the Life Insurance Death Benefit Through My Will?
Your life insurance policy is not a part of your final will. Let us understand why. You mention your assets and their beneficiaries in your choice. Still, since the death benefit of your life insurance policy isn’t a part of your personal asset, as it goes directly to the beneficiaries after your death, it cannot be distributed through your will.
Does My Life Insurance and Will Beneficiary Need to Be the Same?
Though in most cases, the beneficiaries of the death benefit and the last will are their loved ones, and so may be the same, you can name different beneficiaries for both the life insurance policy and the choice. Also, you may name several beneficiaries for both.
The other option is to name primary and contingent beneficiaries in which the latter receives the payout if the primary beneficiary is no more or cannot be located. You may even update your beneficiary list if required, but you must update both the life insurance and will separately.
Can Life Insurance Be Considered Part of My Estate?
Since the death benefit of your life insurance policy is paid directly to the beneficiaries by your insurance provider, it cannot be considered a part of your collection of assets, also termed as your estate.
Scenarios When Life Insurance Goes Through Probate
Typically, life insurance does not go through probate, but it may do so in specific scenarios such as:
If your beneficiaries die before you do
If you don’t have a will
However, if your life insurance becomes part of your estate in the absence of named beneficiaries, it may lead to:
Creditors claiming the death benefit
Higher probate costs and estate taxes
Depositing Death Benefit in a Trust
If you have a living trust, the death benefit can be deposited and distributed among the beneficiaries according to your wishes. Or you can create a conviction for a minor beneficiary to ensure the money’s safe until they become adults.
Benefits of Irrevocable Life Insurance Trust
An irrevocable life insurance trust helps you to avoid estate taxes on your policy. You can name the trust as the policy owner and beneficiary.
Secure the Future of Your Loved Ones with Locke Insurance!
If you want to be assured that your loved ones will be well looked after even after your death, having a life insurance policy can be one of your best options. At Locke Insurance Group, we can help you get the right coverage based on your unique needs and budget. Contact us today for more details!