If you’re doing your estate planning, make sure that you carefully consider all of the assets and documents in play. You need to update things periodically, and you need to know how they interact with one another.
For instance, did you know that your will and your estate plan will not impact the beneficiary designations on certain financial documents? Those designations matter more to the company holding the account, and they follow them regardless.
Say that you have three children and a life insurance policy for $500,000. Only two of your children had been born when you got the policy, so you named them as your beneficiaries, with instructions to split the money. You never updated that designation, but you wrote a will when your third child was born. The will says that the three children should split the life insurance evenly.
They may do so if they read your will and decide to adhere to your wishes, but the will does not legally make it so that they have to. The life insurance company, likewise, will not care about the will. They will just pay out the $500,000 in accordance with the beneficiary designations that you laid out when you bought the policy. Then it’s up to your children, who can share the money with their third sibling — or not — as they so choose.
To avoid arguments and disputes, it’s best to update the designations when you write your will so that they all match. Be sure you understand exactly what legal steps you’re going to need to take and when to review your documents.