Have you purchased, or maybe considered applying for 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. But who wants to mess with all the paperwork? Good news… over the past few years, it’s become a relatively simple process.
Here are some thoughts for applying for life insurance & 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 create 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 among the courts or 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, so these should be reviewed before setting up your own rules.
- Appoint a trust – If you’re 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 donating 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 us any time. If you’ve already purchased your policy and you want to update your beneficiary, just give us a call.