Your will is designed to instruct your heirs on how to distribute your assets. You will pick an estate administrator, and it’s their job to take inventory of all the assets listed in the will and then pass them out.
This works well for things like family heirlooms or even the contents of a bank account. But what if you have something like a life insurance policy and you want to pass that money on to your heirs? Do you need to put the life insurance policy into your will to tell them how to divide it?
Update your beneficiary designations
You actually shouldn’t do this, as life insurance is generally tied to a beneficiary designation. You should’ve made this when you bought the plan initially. If you want to leave the money to someone else or to multiple people, you just need to update the beneficiary designations.
However, if you just add the life insurance policy to your will, the insurance company is still only going to pay out to the person who is the beneficiary. This can create some issues because that person isn’t obligated to share the money – even if your will asks them to – and they could certainly keep the entire sum if they wanted to.
Another option is to create a trust and set up the trust to be the beneficiary of the policy. You can then have a trustee who is in charge of distributing the money or the trust can have rules about how this should be done. But you do not need to put it in your will.
Setting up your estate plan
It’s so important to get your estate planning right, so you definitely want to take the time to look into all the steps that you’ll need to take.