When a person passes away, most of his or her assets will need to go through probate before they can be distributed, even when that individual has a will. There are, however, some exceptions to this rule. Life insurance plans, for instance, do not go through probate.
Furthermore, beneficiary designations on these kinds of policies operate independently from wills and trusts, so they can provide testators with a lot more flexibility during the estate planning process. Strategically using a beneficiary designation could even help avoid a contested estate.
So if you have a life insurance policy and have questions about how your estate plan will affect your beneficiaries and vice versa, you should consider reaching out to an experienced estate planning attorney in Lincolnshire who can evaluate your case and advise you accordingly.
Life Insurance Beneficiaries
When a policyholder who has life insurance passes away, the proceeds of that policy will be transferred to the beneficiary listed on the document. These kinds of policies operate independently of estate plans, which means that a will or trust can’t control what happens to a life insurance policy after the policyholder passes away. In fact, insurance policy designations can even counteract or thwart the overall intent of a person’s estate plan.
Updating Beneficiary Designations
It is not uncommon for life insurance policyholders to forget to update their beneficiary designations. This can have significant repercussions down the road when the policyholder passes away. A policyholder could, for instance, end up leaving the proceeds of a policy to a former partner, someone who has passed away, or to someone with whom he or she no longer has a relationship.
This makes updating one’s beneficiaries extremely important, especially for those who are changing their estate plans or who have undergone a major life change, such as a divorce, remarriage, the birth or adoption of a child, or a death in the family.
Preventing a Contest
While it is possible to contest a beneficiary designation, policyholders can take steps to help prevent this, including:
● Updating designations immediately after a major life change
● Documenting when a failure to update a policy after a major life event was intentional
● Strictly following insurance company procedures when changing beneficiaries; and
● Involving witnesses in changes that could prove controversial
For individuals whose assets are mainly wrapped up in retirement accounts and insurance policies, taking these precautions can help prevent a person from contesting a beneficiary designation after the policyholder passes away. Even if such a contest does occur, a probate judge could still allow the remainder of a policyholder’s assets to be disbursed according to the terms of the non-contested will.
If you have a life insurance policy and need help integrating it with your estate plan, please call Orlowsky & Wilson, Ltd. Attorneys at Law. One of our dedicated Lincolnshire estate planning lawyers can be reached at 847-325-5559 or via online message, so don’t hesitate to reach out to us today.