Have you purchased or considered purchasing life insurance in the past?
If so, you know that deciding on a beneficiary or beneficiaries for your life insurance policy is an extremely important decision.
Here are some thoughts for consideration when choosing a beneficiary:
- Don't ever go without a beneficiary - Even if you feel like you need time to decide on a long-term beneficiary, don't go without one. This would mean in the case of your death, all of your life insurance would have to go through an estate set up by the courts. This would make a lot of hassles for a family member and would also mean paying court fees and taxes out of the life insurance money.
- Always name your beneficiary - If you simply state "my children" or "my spouse" this can lead to disagreements amount the courts of the insurance company in the case of someone having an ex-spouse and a current spouse or step-children, etc. Bottom line? Be specific!
- Set up rules for children or other dependents - Giving someone a substantial amount of money might not be the best idea, if you want them to save and spend wisely. The rules for children becoming a sole beneficiary will vary from state to state, so these should be reviewed before setting up your own rules.
- Appoint a trust - If you are concerned about a beneficiary then consider appointing a responsible individual to become trust of the life insurance money. They will have to respect your wishes as far as the money is concerned. But be sure to select someone you trust or use a legal trust to avoid the potential pitfalls of having someone misuse your funds.
- Consider choosing to charity - If you have an extensive life insurance policy but don't have a specific beneficiary in mind, you might want to consider allotting a large portion to your favorite charitable organization.
Remember that choosing a beneficiary is not an easy process. If you want to discuss the different options for beneficiaries you have in mind, feel free to contact me anytime. If you've already purchased your policy, and you want to update your beneficiary, just give me a call.