The person or entity your name as the beneficiary of your life insurance policy is extremely important. After all, the beneficiary is the one that will receive the life insurance proceeds once you’ve passed on to the next adventure. Here are 5 key points you should consider when deciding who your beneficiary is going to be:
Clarify your life insurance goals.
Know the ‘why’ of your plan. Why do you have the insurance policy in place? Having the ‘why’ down will help you zero in on who or what should be your beneficiary. It will also help you as you consider making changes to your beneficiary. Check the ‘why’ from to time to make sure it still applies.
Naming minor children as beneficiaries is not a good idea.
Minor children cannot receive the proceeds of a life insurance payout, nor can they open accounts. Instead, the judicial system will appoint a guardian for them who will oversee the money for their benefit. Consider naming their guardian first via your will, so that you know it’s someone you trust. Then you need to decide how the money will be entrusted to them, this is a complicated matter, visit with an attorney to help you work through this decision.
Revisit your life insurance beneficiaries regularly.
The proceeds of your policy will go to your beneficiary no matter what your will, probate court or even your family says. Review at least every 5 years or when a change of life happens, divorce, birth of a child, death of a loved one, etc.
Designate a contingent beneficiary.
Having a backup plan can protect your estate plan goals if your primary beneficiary passes away before you do.
With complicated cases or goals a trust may be a good idea as the primary designated beneficiary.
A trust is its own entity. It can be designed to accomplish all kinds of goals pass your lifetime. Creating and naming a trust as the beneficiary is worth looking into if you have complicated issues that need to be addressed. An estate planning attorney is essential in understanding and applying this feature correctly.
Having a life insurance policy in place for the right reasons is part of being a good steward. Whether you are trying to take care of your family, pass on an inheritance or making sure your final expenses are taken care of, the right beneficiary will help you accomplish your goals.