Life Insurance and Your Estate Plan: What Could Possibly Go Wrong?
Life insurance has a reputation for being one of the dullest, most risk-averse things a person could buy. Brash, Entrepreneurship bros everywhere, from multilevel marketing videos on YouTube to the first hour of The Wolf of Wall Street deride the boring schmoes who spend their hard-earned cash betting minuscule amounts of money on their own mortality. Since everyone dies, and since the payout amount is almost always a lot more than what you paid (unless you are Methuselah or unless you wait until the last minute to buy a policy), life insurance is almost always a great investment, even if the ageless bros of the world don’t understand the value of spending money for the financial benefit of someone other than yourself. Life insurance can prevent a lot of problems for families prone to fighting over inheritance, but you should watch out for scenarios where paying out the insurance policy could lead to a dispute. A Hillsborough County estate planning lawyer can help you craft an airtight estate plan, life insurance policies and all.
Ensuring That Everyone Gets Something
It is never too soon to take out a life insurance policy (in fact, the younger and healthier you are when you buy life insurance, the less expensive it is), and you can never have too many policies. In the best-case scenario, life insurance policies can be a way to avoid hurt feelings when you do not have enough money to leave everyone as much money as they were hoping for in your will. Specifically, life insurance can help prevent stepchild drama during probate. For example, if you leave most of your estate to your spouse, the life insurance payouts that your children from a previous marriage receive might be an incentive for them not to give your spouse trouble during probate. (In fact, in the case of families with minor children, divorce courts sometimes order the wealthier spouse to take out a life insurance policy with the children as beneficiaries.) Likewise, if your will has your children inheriting the lion’s share of your property, their stepmother is less likely to try to claim an elective share of your estate if you have generously provided for her with a life insurance policy.
There is still room for trouble, though, if you do not name a beneficiary. Without a listed beneficiary, the court assumes that you are the beneficiary of your own life insurance policy. This means that the payout gets paid to your estate, where it becomes just another probate asset that your family can fight over. This is what happened to Rafael, who named his children as beneficiaries on all of his life insurance policies except one. During probate, his children challenged his wife, the personal representative of the estate, about that policy.
Contact Us Today for Help
A Tampa probate lawyer can help you even if your estate is modest enough that the payout from a life insurance policy could make a big difference. Contact David Toback for a consultation.