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Do life insurance benefits have to be split if a will says that they should be?

On Behalf of | Sep 12, 2023 | Estate Planning |

In many cases, people who purchase life insurance policies do so with the goal of creating one of the most substantial assets that they can pass on to their heirs. They may know that they will use their savings for long-term care or retirement. By purchasing a life insurance policy, which only pays out when they pass away, their heirs can potentially receive a significant amount of money at a critical time.

Yet, life insurance matters can sometimes cause a dispute. For example, say that someone has multiple children and lists them all out in their will as beneficiaries for their life insurance policy. The will makes it clear that the individual wanted the policy to be split up evenly. But the insurance company just pays one heir directly. What has just happened and what comes next?

The beneficiary designation

In this scenario, it is likely that the life insurance company was only given one beneficiary designation. This could happen if a parent has a child, creates a life insurance policy, names that child as the sole beneficiary, and then does not update the designation when more children are born. Instead, they put additional information into their will, stating that the policy should be divided between multiple heirs.

But the life insurance company doesn’t actually have to abide by the terms of a will. The company is only going to look at the beneficiary designation they were provided with initially (unless that beneficiary designation is eventually updated), and they will pay that one individual according to the terms of the policy.

Does that person have to share the money with their siblings? Legally speaking, they are not bound to do so. They have the option to do so if they want, and the other heirs may know that that was their parent’s intent, but the terms of a life insurance beneficiary designation trump instructions detailed in an estate plan.

Resolving a dispute

It’s clear how a situation like this could cause a significant dispute between heirs and make the probate process very complicated. Those who are working their way through probate can often benefit from seeking legal guidance if/when they have questions that could impact their interests, including questions related to the terms of a will and/or beneficiary designations.