You can pass this major asset without a will

On Behalf of | Jan 3, 2024 | Estate Planning |

There are many different ways to pass wealth to the next generation. Financial assets could be listed in a will and given to someone directly. They could be put in a trust so that the beneficiary gets payments at certain times or at the discretion of the trustee. Assets could be passed on using a payable-on-death account to quickly transfer a bank account into someone else’s name.

For many people, though, one of the largest assets they own is a life insurance policy. If this is part of your estate as you’re setting up your plan, you should know that you can pass it to a beneficiary without using a will. You likely do not have to mention it in your estate plan at all – at least if you set the paperwork up properly from the very beginning.

Choosing a beneficiary

When you purchase a life insurance policy, the company will have you choose a beneficiary who should receive that payment if you pass away. When this happens, the company will follow the instructions that they have been given. Even if the estate plan provides updated instructions, the life insurance company does not have to follow them. They are not legally binding. 

As such, if you want to change or update your estate plan, you need to update the beneficiary designation itself. If there’s a conflict between that and the rest of your estate plan, your wishes may not actually be met. But if you name all of the proper beneficiaries upfront – you can name more than one – this can seamlessly pass a significant asset on to the next generation.

It’s very important to understand the nuances of estate planning to preserve assets. Be sure you know what legal steps to take.