If you have a life insurance policy, you may be interested in dividing it between multiple beneficiaries. For example, maybe you have a very expensive policy because it is the main way that you are going to give financial assets to your adult children. You bought the policy when your first child was born, and now you want to split it between all three of your adult children when you pass away.
You can do this, but remember that you can’t simply write these instructions in your will. The life insurance beneficiary designation overrules your estate plan.
For example, perhaps you wrote an estate plan saying that the policy should be evenly split into thirds, with 1/3 going to each child. Your children will know that this is what you intended, but the life insurance provider isn’t going to read or follow your estate plan. They will just look at the beneficiary designation. If you only name your firstborn child, that person gets the full payout.
What options do you have?
The first option, of course, is to update the beneficiary designation. You can add multiple people, so you could just instruct the life insurance provider to split the money between your children.
The second option is to switch the beneficiary designation to a trust. When you pass away, then the trust absorbs the policy payout, and distributions can be made to the beneficiaries out of the trust. This way, you could direct them regarding when they receive their payments, how they are supposed to use the money and much more. The trustee ensures that your instructions are followed.
There are a lot of options with estate planning, but the key is simply to do it in advance and not to overlook crucial details.