When a person makes a will, it is important for them to understand what a will can and cannot control. One incorrect assumption that some people make is that they assume that the terms of a will override all other things when it comes to after-death asset distribution and thus that any asset distribution instruction a person puts in their will will be the controlling one when they die.
However, there are limits to a will’s control. For example, there are certain types of assets that generally have their after-death distribution controlled by a beneficiary designation. One example of such an asset are the benefits of a life insurance policy. Generally, for things like a life insurance policy, the beneficiary designation in the policy will dictate the distribution of the policy’s benefits, regardless of what the terms of the person’s will say.
Thus, if a person wants the proceeds of their life insurance policy to be given to someone other than the beneficiary listed in the policy, they generally cannot simply redirect the benefits through terms in their will. Rather, if they want to make a change, they typically need to directly change the policy’s beneficiary designation.
Thus, not understanding what a will’s limitations are could result in a person not taking the estate planning steps they need to to ensure that what happens after they pass away matches what they want to have happen. Estate planning attorneys can provide individuals with information on what specific limitations wills and other types of estate planning devices have and can help individuals figure out what sort of estate planning steps they need to take to achieve their estate planning goals.
Source: LifeHealthPro, “10 ways to screw up when picking life insurance beneficiaries,” Barbara Marquand, Feb. 19, 2015