If you have a life insurance policy, it represents a significant asset that your heirs can use, despite the fact that you don’t have the money on hand at the time. While doing your estate planning, remember to consider how any insurance policies you may have will eventually fit into the scheme of things.
Because insurance policies are not typically part of someone’s actual estate, how they work may surprise you.
Where will the insurance pay out?
Firstly, consider who (or what) the policy will pay. Do you want the money to go directly to an heir? You can split it between multiple people. You may also want to set things up so that the money gets put into a trust. You can then have your heirs get their money out of the trust. Simply put, there are a lot of options. You just need to decide what works best for your family.
While doing this, it’s also important to consider how things work in order of importance. For instance, your will does not take precedence over the insurance policy’s rules. The beneficiary designation on the life insurance policy does. This means that your estate plan can say what should happen with the payment but, if the beneficiary designation is different, the insurance company will follow that directive — not your estate plan.
How should you set up your plan?
The best thing you can do for your heirs is to consider all of this carefully in advance. Think about what goals you want to accomplish and what the ramifications are going to be for every action. Then take the proper steps to set up a plan that helps your family as much as possible.