What Are Life Insurance Beneficiaries?
- Date: 2007-06-14 - Word Count: 402
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Life Insurance Beneficiaries are going to be the people who receive the benefits. Many people do not realize that the selection of beneficiaries is a very critical part of the Life Insurance process.
Life Insurance Beneficiaries are the entities that are designated in your life insurance policy to receive the payment of the death benefit in the event of your death. In some ways, this is one of the most important decisions that you make when selecting and setting up your Life Insurance. The first rule to remember is to never make your "estate" the beneficiary. If you do this, then you are consigning your death benefit to probate court and opening it up to your creditors. Remember that the whole purpose of the Life Insurance death benefit is the financial protection of your dependents.
It will pay to be very specific in the designation of your beneficiary. Failure to be specific can lead to all kinds of pitfalls. The use of general terms like your "spouse", or "children" are not recommended. Changing life situations can make these terms mean something different at the time of your death then they meant when you declared them to be beneficiaries. It is always better to use actual names.
It is also possible to select backup beneficiaries. These are called contingent or secondary beneficiaries. They would become the main beneficiaries in the event that the primary beneficiary predeceases the policy owner. Some people will take this idea three levels deep and select a third beneficiary. Since the purpose of the Life Insurance is to protect dependents, make sure that the beneficiary is either those dependents or someone you are sure is going to act in accordance with your desires and in the dependents best interest.
If the beneficiaries are minor children, it is possible to designate a guardian for them and a trustee to manage the funds until they are of age. Many people consult with the lawyer who prepared their will or assisted in the setting up of trusts to prepare the wording of the beneficiary designation.
A Life Insurance policy is often a long term proposition. During your lifetime your choice of beneficiary may change. It is not difficult to change your beneficiary, but too often people simply neglect to do it. It is wise to review this situation every couple of years and make certain that your beneficiary information is current and in accordance with your wishes.
Life Insurance Beneficiaries are the entities that are designated in your life insurance policy to receive the payment of the death benefit in the event of your death. In some ways, this is one of the most important decisions that you make when selecting and setting up your Life Insurance. The first rule to remember is to never make your "estate" the beneficiary. If you do this, then you are consigning your death benefit to probate court and opening it up to your creditors. Remember that the whole purpose of the Life Insurance death benefit is the financial protection of your dependents.
It will pay to be very specific in the designation of your beneficiary. Failure to be specific can lead to all kinds of pitfalls. The use of general terms like your "spouse", or "children" are not recommended. Changing life situations can make these terms mean something different at the time of your death then they meant when you declared them to be beneficiaries. It is always better to use actual names.
It is also possible to select backup beneficiaries. These are called contingent or secondary beneficiaries. They would become the main beneficiaries in the event that the primary beneficiary predeceases the policy owner. Some people will take this idea three levels deep and select a third beneficiary. Since the purpose of the Life Insurance is to protect dependents, make sure that the beneficiary is either those dependents or someone you are sure is going to act in accordance with your desires and in the dependents best interest.
If the beneficiaries are minor children, it is possible to designate a guardian for them and a trustee to manage the funds until they are of age. Many people consult with the lawyer who prepared their will or assisted in the setting up of trusts to prepare the wording of the beneficiary designation.
A Life Insurance policy is often a long term proposition. During your lifetime your choice of beneficiary may change. It is not difficult to change your beneficiary, but too often people simply neglect to do it. It is wise to review this situation every couple of years and make certain that your beneficiary information is current and in accordance with your wishes.
Related Tags: planning, life insurance, cash, benefit, death, heirs, beneficiary, estate plan, beneficiaries, heir, payout
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