Your estate plan is designed to help distribute your assets to your heirs and anyone else you choose as a beneficiary. You can typically choose almost anyone you want: friends, family, business partners, charities, etc.
But do all of your assets go through your estate plan? Not always.
For example, if you have a life insurance policy, you are going to have the option to write in the beneficiary of that policy directly when you set it up. When you pass away, the insurance company simply looks at your beneficiary designation and pays out accordingly.
Your will could specify a different outcome, but the beneficiary designation usually carries more weight. That is what you instructed the insurance company to do prior to your death, and it is what they’re going to do.
This can cause a lot of problems if you have any conflicts between the two. Maybe you set the policy up when your first child was born, naming him or her as the beneficiary. Then you had two more children, and you forgot to update the plan itself. Your will may say that the money should get split between all three kids, but, if you did not update the plan in time, all of that money is still going to your firstborn.
Generally, it is wise to revisit any policy you have when a child is born, when a marriage starts or ends, or whenever you go through major events in your life.
As you can see, it is incredibly important to understand all of your options when doing estate planning. The more you know, the smoother the process will be for your heirs.
