Naming a Beneficiary
You will want think carefully before naming a beneficiary to your life insurance policy. This is one of the most important decisions you make when opening a new policy.
You may wish to think about a second or contingent beneficiary in case the primary one dies before or at the same time as you. It is a common practice to name family members as your beneficiaries, but it isn’t necessary.
The next thing you should keep in mind is how the money is going to be handled after you die. For this reason, if you have any doubts, you should consider consulting with an estate planner, accountant, and/or attorney.
When you name one or several beneficiaries, the money will ultimately be divided up as you specify in the policy’s terms. It is crucial that you name your beneficiary or beneficiaries carefully by spelling names correctly and indicating their relationship to you. If you can use their social security numbers, then that will take the guesswork out of making sure your exact wishes are carried out after you are gone.
You should also indicate how you want the money to be divided. Be as specific as possible when you designate your beneficiaries, and don’t use dollar amounts. Instead, use percentages since exact amounts can become irrelevant and outdated as the policy matures. You may not wish to name any minors as beneficiaries, since they will require a legal guardian appointed by the court to manage their money.
Finally, try not to name your estate as your beneficiary. This creates many probate problems, namely taxes, legal questions, delays, debts, and other pitfalls that could otherwise be avoided.