When it comes to end-of-life planning, naming beneficiaries in your will and life insurance policy should be at the top of your list of priorities. Your beneficiaries receive your assets after you die, from your trust and life insurance policies to your stocks, bank accounts, etc. Your beneficiary could be a person, a nonprofit or a trust. If you haven’t designated a life insurance beneficiary, your death benefit will be paid to your estate, which may then end up going through a potentially lengthy and costly probate process. Keep these tips in mind as you consider who to select as your beneficiary recipients.
Do Be Explicit
When it comes to any legal documents, specific instruction is key. Name each beneficiary rather than saying “my children” or “my grandchildren.” The more explicit you can be, the less likely it is for your last wishes to be misinterpreted. Therefore, if you list someone in your will, be sure to have them as your life insurance beneficiaries, too. Life insurance policies are a legally binding contract, so no matter what your will may state, your life insurance payout goes to the beneficiary person or people named on your policy.
Don’t Forget Contingent Beneficiaries
Contingent beneficiaries are essentially your backup beneficiaries. If primary beneficiaries of life insurance have passed away or refuse to accept the death benefit payout, the contingent beneficiaries are next in line to receive the proceeds of your policy. If you have no contingent beneficiaries in this situation, your assets could transfer into your general estate. Be prepared for any situation by including at least one contingent beneficiary in your life insurance policy.
Do Keep Your Beneficiary Designations Updated
Even if you’ve previously named beneficiaries on your life insurance, situations change, and it’s important to make updates when necessary. Births, deaths, marriages and divorces may require you to revisit your beneficiary designations. For example, new members of the family may need to be added, divorced spouses may need to be removed, and deceased beneficiaries may need to be replaced. Most insurance carriers make this process for updating beneficiaries as simple as possible.
Be Careful When Naming a Minor
A minor may not be able to access the assets you leave to them until the age of 18 or 21. Until they reach that age, a conservator will need to manage the funds. If you haven’t designated an adult to be the conservator, the process will have to go through probate court. Putting money into a trust for a minor can be a smart alternative, as it provides you more control over how the assets will be administered.
Do Inform Your Beneficiaries
If you’re naming someone as a beneficiary, make sure they are aware. Beneficiaries must make a claim to your insurer in order to receive the death benefits, and if they don’t know they are a beneficiary recipient, they won’t know to take action.
Don’t Do It All Yourself
Even if your will and life insurance policy are straightforward, you may still consider having a lawyer look over your documents and accounts. A mistake could cost your loved ones lots of money in taxes or even risk someone not receiving your assets at all.
Do Take Steps To Plan Ahead
Keeping your beneficiary recipients up to date can do a lot to give you peace of mind in your end-of-life planning. Having an active life insurance policy is another great way to give yourself peace of mind. From whole life insurance to life insurance eligibility, Americo Financial Life and Annuity Insurance Company (AFL) and our professional insurance agents can help find the answers to your questions, simplify the process and explain your options. When you choose AFL, all you have to do is continue paying your premium. Get a free life insurance quote today!