When your first child was born, you realized that you needed life insurance. You were suddenly so aware of how you needed to provide for someone else and how that need could last for quite some time. You wanted to be sure that your son or daughter had their financial needs met, no matter what.
Since then, you’ve had two more children and you’ve continued to renew the plan when necessary, all without changing it. Now you want to split the money up so it goes to all three of them. Is the easiest way just to update your will to tell them to divide it evenly between themselves once the policy pays out and enters your estate?
You need to change the life insurance forms themselves
This actually won’t work. Don’t think of the life insurance as a payout that becomes part of your estate and then goes to your heir. Instead, think of it as a policy that pays out directly to that child at the moment of your passing, and which is never in your estate at all. It’s money that is given directly to the beneficiary by the insurance company.
What this means is that your oldest child would not have to divide that money three ways if they didn’t want to do so. If they are the only one named as the beneficiary, they can just legally keep all of it. It’s their own money and their own asset from the moment they get the check.
If you want to divide it, you have to update the life insurance forms and tell the insurance company that you have three beneficiaries. They can then pay it out in accordance with your wishes. Alternatively, you could set up some sort of a fund — like a trust — and make it the beneficiary. The trust could then be written to pass the money to your children in any fashion you desire. But your will itself does not play a role here.
Preparing your estate
As you work to prepare your estate and set everything up, just be sure you know exactly what steps you need to take going forward.
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