In some cases, a person passes away, and family members and other beneficiaries find that there are differences between their estate planning documents. There may be a conflict between a life insurance policy and a will, for example.
Say that an elderly person took out a life insurance policy for $1 million. They named one of their children as the beneficiary who should receive the payout from the life insurance provider once they have been given proof that the elderly person has passed away.
However, in that person’s estate plan, the will says that the $1 million should be split between multiple beneficiaries. Maybe there are multiple siblings who should divide it equally, or perhaps certain amounts are allotted for grandchildren and other extended family members.
The life insurance beneficiary designation takes precedence
What generally happens is that the life insurance provider will simply pay the listed beneficiary on their forms. That beneficiary designation takes precedence over anything that was written in the will or other estate planning documents.
This can often lead to conflicts between family members. If only one person was listed and they receive the entire sum, they do still have the option to voluntarily share it with the other beneficiaries noted in the estate plan. But if they decide to keep the entire amount to themselves, this can lead to conflicts with others who believe that they are entitled to a portion of the payout.
Not only is it important to correctly draft estate planning documentation to avoid these disputes, but it is also crucial for those going through such a dispute to know what legal options they have to seek an appropriate resolution.