You’ve always lived within your means, but you also haven’t saved up a tremendous amount of assets. Your adult children are not going to inherit that much in the way of bank accounts or real estate assets.
What you have done, however, is to take out a substantial life insurance policy. When you pass away, the policy will pay out, so you know that your children are going to get a significant inheritance.
But how do you divide that inheritance? Say that you have four adult children and the policy will pay out $1 million. You want them all to get $250,000. Should you just write that allocation in your will?
Consider the beneficiary designation
Generally, you don’t need to mention your life insurance in your will. After all, there’s a beneficiary designation on the policy itself.
For instance, maybe you named your firstborn child as the beneficiary because they were the only child you had when you took out the policy. Even if your will says that they should split it with their three siblings, the life insurance company will pay the full total to your oldest child.
There are ways to address this through estate planning, however. One could be to update the beneficiary designation to a trust. You can then create rules for the trust, and the trustee will distribute the funds as intended. The life insurance company pays the full amount into the trust, and the trustee then splits it equally between your four children.
These are just a few examples of how this process could work, but they help to illustrate why you need to carefully consider your legal options when addressing substantial assets in your estate plan.