By Lane V. Erickson, Attorney
Life insurance can be an important part of your estate planning. This is particularly true if you are the main provider for your family. Life insurance can provide a great level of protection when you have minor dependents such as small children and/or a stay-at-home spouse. And using life insurance as a component in your estate planning there are two specific things that you need to be aware of.
1. LIFE INSURANCE IS NOT A PART OF YOUR ESTATE
The first thing that you need to understand is that life insurance is not a part of your estate. That is not to say that life insurance is not a part of your estate planning. There is a great difference between your estate planning and what actually is your estate. Life insurance is a third party contract where you pay premiums in exchange for a contract promising a large payout to a specific person on your death. This person is known as a beneficiary. Many people become confused because the people who are listed in your last will and testament are also known as beneficiaries. Just know that these people do not necessarily have to be the same.
The third-party contract you get for your life insurance State specifically that the insurance company must pay the money out directly to the beneficiary you name. Because of this, the money that is paid never actually becomes part of your estate. The benefit of this is that there is no need for probate in order for life insurance to be paid to the beneficiary. Rather, all that is usually necessary is evidence of your death through a death certificate, and approved by the person that they are the beneficiary.
2. LIFE INSURANCE IS NOT CONTROLLED BY YOUR WILL
Because life insurance is not part of your estate, the life insurance policy is not controlled in any way by your last will and testament. In other words, if you get a life insurance policy and you name your son as the beneficiary then it won’t make any difference if you state in your last will and testament that your life insurance policy goes to your daughter. This is because your life insurance policy is a contract with the insurance company. The insurance company has a legal obligation to follow the terms of the written contract. The insurance company could care less what your last will and testament says, even if it is contradictory to what you have listed in the insurance contract.
If you have questions about your life insurance policy and how it fits into your estate planning, we can help. Call us toll free at 877-232-6101 or 208-232-6101 for a consultation with Lane Erickson and the Racine Olson team of Estate Planning attorneys in Idaho. You can also email Lane Erickson directly at lve@racinelaw.net. We will answer your Idaho Estate Planning questions and will help you solve your Idaho Estate Planning problems.
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