Part 1: How Do You Choose Life Insurance Beneficiaries?

Choosing a beneficiary for your life insurance policy isn’t as easy as you might think. That’s because naming someone as your life insurance beneficiary really has nothing to do with you. Why? Because you should consider how that money will affect your beneficiary’s life once you’re gone. If you’re not careful, you might create problems for your loved ones.

Here are a few important questions you should ask yourself when choosing your life insurance beneficiary:

1. What Are Your Goals?

Ask yourself: what do you ultimately intend to accomplish with your life insurance? For example, are you trying to replace income for your spouse and kids? Are you just trying to cover your funeral costs?

The real reason you’re investing in life insurance is something only you can answer. And that answer will put you in a better position to choose your beneficiary.

2. What Are Your Beneficiary Options?

Your primary beneficiary is your first choice. If you don’t name a beneficiary, then your life insurance goes to your estate. That means that your life insurance will end up in Probate. Your insurance company will ask you to name your top choice to get the money after your death. This is the primary beneficiary. Probate can tie up your life insurance in court for months or even years.

You should also name a backup beneficiary (a/k/a your alternate or contingent beneficiary)

Attorney Myrna Serrano Setty is a compassionate Florida attorney with extensive experience helping Tampa and Wesley Chapel families complete their estate planning. All too often, estate planning law lacks the human touch and voice to make it accessible to everyday families, which Attorney Myrna Serrano Setty is doing her best to remedy by empowering them through her writing.

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When choosing your beneficiaries, you should ultimately base your decision on which person(s) or organization(s) you think would most benefit from the money. In general, you can designate one or more of the following examples as beneficiaries:

• One person
• Two or more people (you decide how money is split among them)
• A trust you’ve created
• Your estate
• A charity, nonprofit, or business

3. Do You Have Minor Children?

If you name a minor child as a primary or contingent beneficiary (and he or she ends up receiving the policy proceeds), a legal guardian must be appointed to manage the funds until the child comes of age. This can lead to numerous complications, so you should definitely consult with an experienced estate planning attorney if you’re considering this option.

Check out Part Two in this series discussing the remaining three questions to consider when naming beneficiaries for your life insurance policy.