If you have life insurance, you may wonder how it works with a Will.  If you have life insurance, do you still need a last will and testament?  If your will names different beneficiaries than your life insurance policy, does one supersede the other?  Here we help you answer these questions about how life insurance works with a will, and if you still need a will if you have a life insurance policy.  The short answer is that yes, you do still need a will if you have life insurance.

Purpose of a Last Will and Testament

A last will and testament is meant to identify the people or organizations who are to receive your assets and possessions upon your death.  You can leave people specific possessions and assets, or you can allocate portions of your estate to different parties.  Many people use a will to leave their money to a charity upon their death as well.  You can even leave a pet to someone of your choosing.  A will is meant to carry out your last wishes and disburse your estate.  Usually, people will use a will to leave money and assets to their next of kin such as their children.  Common items left to others in a will and testament include:

  • Real Estate
  • Money
  • Valuable Artwork
  • Sentimental Possessions
  • Valuable Vehicles
  • Other items of value such as a collection (for example stamps, rare coins, or wine).

Is Life Insurance Affected by a Will?

Life insurance can be affected by a will, or it can not be, depending upon whether or not beneficiaries were named on the life insurance policy.  A last will and testament is used to direct the distribution of the assets of the estate of the deceased.  When a beneficiary is not named on a life insurance policy, the death claim is paid out into the estate.  From there, the estate is subject to probate, as well as the instructions of the will and testament.  When no beneficiary is named, this makes the payout subject to things like claims by creditors, or Medicaid reimbursement.  This is not an ideal way to expose the payout of a life insurance policy to other parties besides heirs.

If a beneficiary is named on a life insurance policy the payout actually bypasses the estate.  This protects the payout from creditors and Medicaid reimbursement.  As long as a living beneficiary is named on the policy, life insurance is not affected by a last will and testament.

To make sure that a living beneficiary is named, it is a good practice to name both primary and secondary beneficiaries.  If the primary beneficiaries pass away, the money will flow to the secondary beneficiaries.  You can also name a third layer of beneficiaries in case the secondary beneficiaries are also no longer alive, this third layer is known as the tertiary beneficiaries.

Can A Will Over-Ride Life Insurance Beneficiaries

No.  If you name different beneficiaries of your estate than you life insurance policy, the will does not override the policy.  Even if you direct life insurance proceeds in your will, it does not supersede the beneficiaries named on a life insurance policy.  The only time that the will can direct where the life insurance payout goes, is if the life insurance pays into the estate because no living beneficiaries are named.

Do you Need a Will with Life Insurance?

Yes.  A life insurance policy and a last will and testament act to distribute two different sets of assets.  The life insurance policy distributes the death benefit and the will distributes the estate.  Ideally, life insurance bypasses the estate because a beneficiary is named.  Even if a beneficiary is named in a life insurance policy, you still need a last will and testament because most likely there will still be other assets to be distributed, even if they are only sentimental in value.  If for some reason you do not have a living beneficiary when you pass away, you don’t want to risk money being sent to people you don’t want it to go to.  You need a last will and testament as a backstop to give money to your heirs according to your wishes.


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