Wills are very powerful testamentary instruments. People can choose their beneficiaries, allocate their property and even designate their personal representatives using wills. Although wills are useful in a broad range of circumstances, there are certain goals people cannot achieve with a will.
There are certain mistakes that those drafting wills commonly make that could undermine their wishes and complicate estate administration. Issues related to estate administration are common when people address their insurance policies in their wills.
Insurance paperwork identifies beneficiaries
People may find beneficiary designations a bit confusing during the estate planning process. The use of the same name for those receiving property from an estate as those receiving the payout from an insurance policy could result in people making preventable estate planning mistakes.
Specifically, testators might provide instructions regarding who should receive the payout from their life insurance policy in their will. However, that information could contradict the details on the paperwork submitted to the insurance company. Out-of-date beneficiary designations with a life insurance company can lead to the wrong party receiving those funds.
The details included in a will do not override the terms set with the life insurance company. Many people completely forego the inclusion of life insurance information in their wills to avoid scenarios in which they mistakenly update the will but not the documentation with the insurance company.
Understanding the common mistakes that occur while drafting wills can help people avoid them. People with life insurance generally need to update beneficiary designations with their insurance company/companies rather than addressing their policies in their estate planning documents.