What to do with an insurance policy if the beneficiary designation conflicts with the terms of a family trust?

My mom has her assets in a revocable family trust, which consists of her home and insurance policies. Her Will (with little exception) states that each of her 3 children will share evenly in her estate. However, there is 1 insurance policy included in the trust where she specifically named her grandchildren as beneficiaries. Is there a conflict? Should that policy be excluded from the trust?

Asked on October 30, 2011 under Estate Planning, New York

Answers:

Sharon Siegel / Siegel & Siegel, P.C.

Answered 9 years ago | Contributor

If your mom is still alive and competent, she should see a lawyer to clean up this issue.  If your has passed, the insurance passes to the designated beneficiary outside of probate (outside of a will).   Of course, this can be challenged, but it will likely pass to the designated beneficiary.  If the trust is the designated beneificary,  te proceeds of the trust will pass pursuant to the terms of the trust.  Thus, for example, if all assets in the trust go to one child, those assets held in the trust  will go, following the same example, to that one child.  It would not matter what the will said.   The will could be challenged.  This is common.  The only policies that will be distributed according to the trust are those with the name of the trust as the designated benficiary.

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