Should I List Beneficiaries on My Life Insurance?
Life insurance provides financial protection for your beneficiaries after your death. However, selecting the right beneficiaries requires careful consideration to ensure your policy serves its intended purpose.
Three Smart Moves for Choosing Beneficiaries
1. Align Beneficiaries with Your Policy’s Purpose
Your choice of beneficiaries should reflect why you purchased the policy in the first place. If the primary goal is supporting your children, list them first. If you want to replace lost income for your spouse, designate them as the primary beneficiary. For business continuity purposes, adjust beneficiaries accordingly.
2. Always Name Contingent Beneficiaries
A contingent beneficiary receives the policy proceeds if your primary beneficiary cannot be located, declines the funds, or has passed away. If you have multiple contingent beneficiaries, distribute the proceeds as desired, ensuring allocations total 100%.
A common arrangement places your spouse as primary beneficiary with children listed as secondary beneficiaries.
3. Exercise Caution When Naming Minors
While you may list minors as beneficiaries, complications can arise. State regulations vary regarding how much money minors can access directly from life insurance policies. Courts may need to appoint a guardian to manage the funds, potentially creating delays.
Important consideration: If you name a trusted adult (other than your spouse) as beneficiary to manage funds for minor children, be aware that if that person dies, the proceeds will be distributed according to their estate plan, not yours. Using legal strategies like trusts can prevent these unintended consequences.
Key Takeaway
Life insurance beneficiary decisions should reflect your personal financial situation, preferences, and goals. Professional guidance can help ensure your plan achieves its intended outcomes.
If you or a loved one needs assistance with life insurance planning or estate planning, do not hesitate to contact The Stegall Law Firm for a consultation.
