Let’s talk benes!!!
At first thought, naming a beneficiary seems to be an easy thing to do, a no brainer. The reality is naming a beneficiary is one of the most important things you can do and one that requires planning and thought. A beneficiary is a person or legal entity that is entitled to receive proceeds from a life insurance policy, an estate, a retirement plan, or some other asset. A beneficiary can be an individual (s), a charity, a trust or some other organization. You can have a primary beneficiary (first in line) and a secondary (contingent) beneficiary. You can have single or multiple beneficiaries depending on who you want to inherit whatever it is you are leaving. Naming a beneficiary on a life insurance or retirement plan supersedes any instructions you might have in a will as they pass to beneficiaries directly. Naming a beneficiary on these assets will pass directly to whom you designate, so they will not have to pass through probate, which can be a lengthy process and is not without cost. Keep in mind that your beneficiary designations will override any bequests you might have made in your Will. So even if your Will states all assets should go to your spouse, if you’ve named someone else a beneficiary for your life insurance, your spouse will be out of luck.
The biggest misconception I’ve some across is people who name their minor children as beneficiaries. That might seem to make sense, but as minors, they might not receive the proceeds right away. In most states, the law requires a guardian be appointed to administer any proceeds that are payable to the minor. Proceeds will be controlled by this guardian for the minor’s benefit.
If you have a special needs child or if there is an adult you are responsible to care for, inherited funds might jeopardize any government support they might be entitled to. With these cases, it is best to consult with your legal professionals to make certain whatever you’re doing is the correct way.
This really comes down to one thing – be careful about who you name as beneficiaries. In many cases, it is simple and can be a no brainer – but think this through, speak to professionals about this – your insurance agent, your attorney, then make an informed decision.
