Do Life Insurance Beneficiary Rules Supersede Those of a Will in New York?
Life insurance can be a great investment to alleviate the financial burden on your surviving family should you die unexpectedly. The policy can help cover the costs of your funeral, pay off outstanding debts, and ensure your family is provided for financially.
However, there can be issues that arise regarding wither your life insurance beneficiary rules will supersede those of your will. When you die, whether you have a will or not, your estate must go through the New York State probate process.
If you have a will, then the Surrogate Court will use probate rules to ensure your estate is handled according to your will. If you do not have a will, then the Surrogate Court will use an administrative proceeding to handle your estate and its distribution to surviving family members.
Yet, if you have a life insurance policy and a will, the Court will follow the beneficiary rules of the insurance policy and not your will, in most cases. So, if you named your wife as the beneficiary years ago when you got the policy and then named your children as beneficiaries in your will, your wife would receive all the proceeds from the life insurance policy.
Exceptions When Your Will Supersedes Life Insurance Beneficiary Rules
There are a few different exceptions where you will supersede the life insurance beneficiary rules:
Exception Example #1
You named your wife as beneficiary of your life insurance. However, you got divorced but forgot to update your life insurance. Your divorce decree included a statement where your ex-wife gave up all rights and claims to life insurance, retirement accounts, and other such assets. In this situation, then the beneficiary or beneficiaries named in your will would receive the life insurance proceeds.
Exception Example #2
You named your wife as beneficiary of your life insurance. Your wife passed away before you. You forgot to update your life insurance. Upon your death, if you had named beneficiaries in your will, they would receive the proceeds of the life insurance. If you did not, then the proceeds become part of the cash assets for your estate and are distributed according to your wishes.
Exception Example #3
You named your two children as beneficiaries of your life insurance. One of your children passed away before you did. Upon your death, the percentage that was to go to the child that died would either be distributed based on the beneficiary named in your will or become part of the cash assets of your estate and distributed accordingly.
Please keep in mind, these are very general examples to demonstrate when a will supersedes a life insurance beneficiary. There can be complex situations that can and do vary from one family to another.
In addition, for other types of accounts that have named beneficiaries like savings accounts, retirement accounts, investment accounts, etc., the beneficiaries named on these accounts would also supersede those named in a will in most cases.
Therefore, it is essential to get into the habit of reviewing named beneficiaries listed on life insurance and financial accounts annually. Updating beneficiaries is not difficult, and you may even be able to do so online.
You should also make it a habit to review and update your will annually, as necessary, with help from a New York probate attorney to ensure that the will reflects your current intentions and wishes.
For further assistance with creating or updating a will or assistance with updating beneficiaries on life insurance and financial accounts in Queens, Brooklyn, Manhattan, Jamaica, or New York City, please feel free to contact Ledwidge & Associates, P.C. at 718-276-6656 today!
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