Choose your beneficiaries to life insurance policies wisely
It is imperative for everyone to have a life insurance policy to safeguard the future of their loved ones. Besides looking for the right policy, you have to remember to choose the right beneficiaries to the life insurance policy.
The beneficiaries to life insurance policies aware the people who will receive the death benefit proceeds of a life insurance policy, which will be federal income tax free. Usually people don’t give this matter much thought, and just name a spouse and or children as the beneficiary.
Assets can be distributed according to the list of beneficiaries
If the beneficiary is a child, policies don’t usually transfer funds directly to their account unless a trustee is appointed, or the court appoints a guardian. Trustees are chosen as a prudent beneficiary choice if the surviving spouse is not capable of managing large sums of money.
This is why it is important to name secondary beneficiaries to a life insurance policy. Moreover, if a person does not have a will at the time of death, according to state’s law, the assets of the person is distributed in order of legal beneficiaries.
This is why lots of thought has to be put into naming the beneficiaries of your life insurance policy. It is a tendency for most people to name minors as beneficiaries when buying a policy.
Minors can’t take control of proceeds on receiving them
However as minors cannot receive or take control of proceeds on receiving them, you have to bear this point in mind before naming them. Choose the appropriate trustee or guardian in such conditions to take care of both insurance and assets proceeds till the child reaches an age of majority.
In case a child dies before you, and you want their rights to pass to their children, you have to state this in your policy. It is also important that you decide how you wish your grandchildren share their proceeds with other children.
Use the help of an agent and attorney in naming your beneficiaries
Never just write your ‘husband’ or ‘wife’ as a beneficiary as if you have an ex-spouse, they can stake a claim to the proceeds. Similarly, you will have to keep this point in mind when stating the beneficiary to your life insurance policy, in case of a divorce.
It is better to name all your children whom you are making beneficiaries to the life insurance policy. This will not let any children of your past marriage, whom you are not interested in including as your beneficiary, to stake a claim to your insurance policy.
It is always better to designate a secondary beneficiary for the life insurance policy, in case the primary beneficiary passes away before you. It is better to choose the wordings for your beneficiaries to life insurance policies with the help of your agent, broker and attorney who had drafted all your wills and trusts.
They will be able to anticipate as many difficult situations as possible so that you will wisely be able to state the beneficiaries to your life insurance policy.