Both a will and life insurance transfer assets to the people the decedent designates. That said, they work in different ways and different laws govern each. This article outlines how one affects the other and whether a will supersedes a beneficiary designation in a life insurance policy.

If you are a life insurance beneficiary having trouble getting the payout due to contrary will bequests or a life insurance beneficiary dispute, call the experienced life insurance lawyers at Boonswang Law. We have helped life insurance beneficiaries across the nation get the money their loved one intended they recieve. 

A Beneficiary Designation Overrides a Will

In short, whomever the policyholder designates as the beneficiary or beneficiaries to their life insurance death benefit gets that money regardless of who the policyholder named in their will. This is true even if a bequest in the will specifically contradicts the life insurance beneficiary designation.

In short, a will does not supersede or override a beneficiary designation. Whomever you designate as a beneficiary in your life insurance policy usually receives the death benefit.

Life Insurance Beneficiary Designation vs. a Will

What a Life Insurance Beneficiary Is

Life insurance is a contract between the policyholder and the life insurance company. In exchange for the policyholder’s premium payments, the life insurance company pays the  policyholder’s designated beneficiaries the death benefit if the policyholder dies within the coverage term. 

A policyholder may name whomever they wish as a beneficiary and may change the beneficiary designation at any time. They may even change the life insurance beneficiary just before they die. A policyholder may also name multiple primary beneficiaries as well as secondary, or contingent beneficiaries.

Life insurance is governed by state law unless it is group life insurance through an employer, which is governed by federal ERISA law. While a life insurance beneficiary designation cannot be changed after the policyholder’s death, these laws may override a beneficiary designation in a revocation-upon-divorce state. As such, a spouse or ex-spouse who is not a named beneficiary may be entitled to some or all of the death benefit in a community property state such as California or Texas.

Distributing Assets Through Will Bequests

A will is governed by state law and is only binding if it was created in compliance with those laws. In a will, someone dictates who gets their assets upon their death, whether those assets are personal belongings, real estate, bank accounts, or stocks and other investments.

Someone may make will bequests to anyone they wish, and a valid will cannot change after the decedent’s death.

Avoiding Life Insurance Beneficiary Mistakes

You’ve paid premiums all this time, now make sure the death benefit goes to the people you intend.

Name Multiple Beneficiaries

You can name multiple primary life insurance beneficiaries, or a primary life insurance beneficiary and contingent or secondary beneficiaries who receive the death benefit if the primary beneficiary predeceases you.

Keep Your Beneficiary Designations Updated

If a major life event occurs, such as marriage, a child being born, divorce, or a beneficiary has died, be sure to update your beneficiary designation accordingly. Be aware that in some cases, a divorce decree overrides a beneficiary designation, and if you live in a community property state, your life insurance policy may be a marital asset and your spouse or ex-spouse may be entitled to some or all of the death benefit.

What happens when life insurance has no beneficiary? The policy pays out to the policyholder’s estate.

Don’t Designate Your Estate as Your Beneficiary

If you designate your estate as your beneficiary, your heirs will not receive the death benefit until your estate goes through probate and “settles.” This means all of your assets are identified and all of your outstanding debts are paid. Because assets in your estate are subject to the claims of your creditors, your heirs may not receive the whole amount of the death benefit.

Do You Need Both Life Insurance & a Will?

You need life insurance if someone depends upon you financially, such as a spouse or a child with special needs, or if you have debt that must be paid upon your death, such as a mortgage or a personal guarantee on a business loan. 

You need a will if you have assets, money or otherwise, you want passed to specific people or organizations upon your death.

Most people need or want a will, and many people need or want both a will and life insurance.

Talk with a Life Insurance Lawyer About a Contested Beneficiary

When someone dies, their loved ones must locate their will and their life insurance policy, find the executor if there is a will, and find the beneficiaries if there is life insurance – all while grieving their loss. If there are conflicting life insurance beneficiary designations and will bequests, a beneficiary dispute only makes things more difficult for the bereaved.
Talk with the experienced life insurance lawyers at Boonswang Law if you find yourself in a beneficiary dispute, or if you believe you should be a designated beneficiary but were not named. We discuss your case with you free of charge, and we only take cases on a contingency basis, meaning we do not get paid unless and until you do. Call today.