Every life insurance policy requires you to name a life insurance beneficiary.
A beneficiary definition is simply who gets the payout on the life insurance
policy in the event you pass away.
Your beneficiary can be…
* A person
* Several people
* An estate
* A trust
* A charity
Life Insurance Beneficiary Tips…
Here are some basic things to know about naming a life insurance beneficiary
along with a few helpful tips…
* Know that you can name more than one beneficiary.
You can name one beneficiary or two or more beneficiaries. You’ll typically
be asked which percentage of the payout goes to each person… for instance,
you could designate 70% to a spouse and 30% to an adult child.
* Make sure to name a secondary beneficiary.
Think of a secondary, or contingent, beneficiary as a backup. He or she
receives the life insurance payout in the event the primary beneficiary is no
longer alive when the payout is being made.
* Be specific with names.
It’s best to list the name and Social Security number of each beneficiary
rather than something generic like “my children.” This will prevent any
confusion and speed up the payout process.
* Keep your beneficiaries in the loop.
Tell your life insurance beneficiaries about your plans and give them copies
of the policy.
* Review your life insurance policy and its beneficiaries once a year.
In addition to an annual policy review, you’ll want to revisit your life
insurance policy after any major life event like a marriage, birth, divorce,
or death.
Special Beneficiary Considerations
Think carefully about the following special considerations when naming a
beneficiary.
* Think through how to provide for a minor.
Providing for kids is a big reason why many people buy life insurance.
Most people name a surviving parent or partner as the beneficiary, with the
understanding that the payout will help cover kid-related costs. But that’s not
a possibility if you’re widowed or if you and your spouse or partner pass
away at the same time. In situations like this, it’s best to name a highly
trustworthy adult custodian as the beneficiary or to work with an attorney to
set up a trust to manage and distribute the funds. Whatever you do, don’t
name the child as the beneficiary… the law prohibits anyone from receiving
a life insurance payout if they aren’t the age of majority
which could be 18 or 21 depending on your state).
* Consult with an attorney if you have a disabled or special needs child.
You’ll want to set up life insurance for a disabled or special needs child in a
way that doesn’t impact his or her eligibility for certain government programs
like Medicaid. The best way to do that is to work with an attorney to set up a
trust to benefit the child.
* Avoid naming your estate as a beneficiary.
Naming your estate as a beneficiary is a bad idea because it leads to a long
(and potentially costly) legal process known as probate. For this reason, it’s a
better idea to name a person, people or organization as the life insurance
beneficiary.
* Know that there’s several ways to benefit a charity.
Leaving money to a nonprofit organization is one reason people take out a
life insurance policy. There are four ways to benefit a charity: by naming
it as a beneficiary; by making it both the owner and the beneficiary of a
life insurance policy; by adding a charitable-giving rider to a life insurance
policy; and by working with a community foundation.
* Get help with other special situations.
There can be tax consequences and other issues if the policyholder and insured
aren’t the same person. Ditto if you live in a community property state and
don’t name your spouse as a beneficiary. Avoid any tangles by turning to
your insurance agent or attorney for advice.
https://lifehappens.org/life-insurance-101/who-can-be-a-life-insurance-beneficiary/
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