If you have a life insurance policy, that policy generally comes with a death benefit. Such a benefit makes it possible to name a person or entity who will receive a lump sum of cash upon your death. While you can name anyone you want, it is important to make sure that it actually gets to the desired individual.
Your Spouse May Receive the Benefit by Default
If you are married and don’t name a beneficiary, your spouse may automatically get that benefit. While this may be fine for most, make sure to state your intentions if this is not the case. Also, if you name your spouse as a beneficiary and then get divorced, he or she is still the beneficiary until you change it. It is always in your best interest to adjust your beneficiary as soon as possible to avoid forgetting about it or not being able to because of other life events.
Minors Generally Can’t Receive Benefits Directly
A minor under the age of 18 generally cannot receive a benefit directly from their parents or any other adult. There are three ways that you can go about getting around this rule. First, you may simply give the benefit to an adult with instructions that it be used for the child. However, there is no guarantee that this will happen. Second, you could direct your executor to keep the estate open until the child reaches the age of majority. Finally, you may wish to create a trust and name it as the beneficiary. The funds will then be distributed according to language in the trust that you create.
What Happens if I Don’t Name a Beneficiary?
If you don’t name a beneficiary on the policy itself, you could name one in your will. In most cases, that will be enough to ensure that the money goes where you want it to. However, if you don’t have a will or trust, the money may go to a spouse or other family members as directed by state law.
When you pass on, you will want to know that your family members, friends or others are taken care of. One way to do this is to clearly state where you want the death benefit from an insurance policy to go. This can be done quickly by stating a preference on the policy itself or by working with your attorney to make necessary arrangements.
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