Do you have a life insurance policy? If you are thinking about drawing up a life insurance policy, you need to be aware about important considerations when naming your beneficiaries. Your policy will ask for a primary and secondary beneficiary in case you were to die.
So, what do you need to know before naming a beneficiary on your life insurance policy? We’ve got you covered.
- Do Not Change the Beneficiary in Your Will: You may think your will is the last word on who gets your money. But if the life insurance policy names one person and your will specifies someone different, that will hold up the disbursement of your money. Be sure to go through the insurance company and complete the necessary information with them to designate the proper beneficiaries.
- Consider Setting Up a Trust for Your Life Insurance Policy: You can set up an irrevocable trust for your life insurance policy. When you name the trust as the beneficiary, the money will go to the trust, and the trustee will follow the rules to disperse the funds to the beneficiaries when they become old enough.
- Name a Specific Person Instead of a Group: You can name a person or a class of people as the beneficiary of your trust. For example, you may be tempted to say, my children. But this could get murky if you have step-children. Be specific about who you name to avoid future problems.
- Update the Beneficiary with Any Life Change: If something happens in your life, like a divorce or death, you will need to update your beneficiary as the changes occur.
- Name an Adult as the Beneficiary: If you name a minor as your life insurance policy beneficiary, you may run into problems with having to pay a fee to appoint a guardian for the benefits. Once the minor is of age, then they will receive the funds. Depending on the amount of the insurance proceeds, this can be potentially very harmful to the child.
- Tell Your Friends and Family About the Policy: One of the essential parts of setting up a life insurance policy is letting your friends and family know that it exists. When you pass away, you want them to know where to go to be able to pay for the funeral expenses and cover everyday bills. Your life insurance policy may provide significant relief to your family members.
Shoup Legal is here to help include your life insurance beneficiaries in your estate plan. Meet with us to discuss more about your estate planning options. Contact us at (951) 455-4114 or email [email protected] to get started planning today for peace of mind tomorrow.