Choosing a beneficiary for your life insurance.
When it comes to designating a beneficiary on your life insurance, it seems like a no-brainer. You name your spouse or kids, right? Not so fast. There's a lot of things to consider when choosing a beneficiary that may not have even crossed your mind. Here are a few questions to consider:
What happens if I don't name a beneficiary? If you decide to not designate anyone, the proceeds will be paid to your estate & a probate court will have to decide what happens to it. This is an expensive process that will chip away at those funds, and they may not end up in the best hands in the end.
Should I name my children? State regulations dictate how much money a minor can receive from a life insurance policy & a guardian may have to be appointed, once again slicing into the money that your child actually gets. Additionally, it's a very lengthy process, tying up that money indefinitely.
What about a disabled friend or family member? Anyone receiving SSI and / or Medicaid could have their benefits reduced if your "gift" substantially increases their income.
Who can I designate besides a family member? You may consider a charity, a trust, or your estate. If you have a business & you want it to continue after your passing, a business partner may be the most logical designee.
What if the person I designate isn't eligible ? You have the option of naming a contingent beneficiary if the primary can't be located, refuses, or is found to be deceased.
Finally, it's important to note that if the details in your will don't match the actual policy, the policy wins. That policy is a legal contract, so make sure to keep both documents up to date to avoid confusion and legal red tape.
There's a lot to unpack here, but it's important to understand the ramifications of your choice so the dollars you so thoughtfully set aside can do the most good and truly have the impact you intend. Don't forget that one of the challenges this month is to find a life insurance professional to discuss your needs. Have you already completed the challenge? Let us know in the comments!
