And you shouldn't name a minor or a pet, either, because they won't be legally allowed to receive the money you left for them. Naming your estate as your beneficiary could give creditors access to your life insurance death benefit, which means your loved ones could get less money.
Yes. You may name anyone as the beneficiary. Some policies may allow you to prohibit distributions to some people should your beneficiary predecease you.
Life insurance may not pay out if the policy expires, premiums aren't paid, or there are false statements on the application. Other reasons include death from illegal activities, suicide, or homicide, with insurers investigating claims thoroughly.
You can name multiple contingent beneficiaries and specify different percentages for each. Like primary beneficiaries, they can be individuals, charities, trusts, or your estate. They have no rights to the assets while primary beneficiaries are still living and eligible to inherit.
Estranged relatives or former spouses – Family relationships can be complicated, so think carefully if an estranged relative or ex-spouse really aligns with your wishes. Pets – Pets can't legally own property, so naming them directly as beneficiaries is problematic.
As a standard life insurance beneficiary rule, you must explicitly identify each beneficiary with their full name and Social Security number. Pro tip: Do you live in a community property state? If so, you'll need your spouse's consent to designate a primary beneficiary other than them.
A will cannot override a beneficiary designation because the policy is a contract between the person who purchases it and the issuer. The only way anyone can override a beneficiary other than the policyholder is if a court determines there's a conflict between named beneficiaries and state laws.
In most cases, the death benefit goes directly to your beneficiaries and not your estate. That means a creditor cannot make a claim against it. This holds true for a small final expense policy or a whole life policy.
Life insurance covers death due to natural causes, illness, and accidents. However, the insurance company can deny paying out your death benefit in certain circumstances, such as if you lie on your application, engage in risky behaviors, or fail to pay your premiums.
Ways an Executor Can Override a Beneficiary
For example, the executor may decide to sell estate property that one or more of the beneficiaries were hoping to receive as part of their inheritance.
In many cases, it takes anywhere from 14 to 60 days for beneficiaries to receive a life insurance payout. But many factors impact this time frame. These include the insurance company's procedures, when the claim is filed, how long the policy was active, the cause of death, and state laws regarding insurance payouts.
A lot of people name a close relative—like a spouse, brother or sister, or child—as a beneficiary. You can also choose a more distant relative or a friend. If you want to designate a friend as your beneficiary, be sure to check with your insurance company or directly with your state.
The beneficiary can use the money as they see fit and is not required to split life insurance with siblings or other family members. However, there are situations where siblings may challenge the distribution of life insurance benefits.
Note that the preferred beneficiary status does not apply to siblings.
When a loved one passes away, you'll have a lot to take care of, including their finances. It's important to remember that credit card debt does not automatically go away when someone dies. It must be paid by the estate or the co-signers on the account.
Most insurance companies attempt to contact beneficiaries. But that's only if they're aware something happened. In most cases death benefits aren't paid out unless someone files a claim. Even then, there could be cause for delay.
If there are no living primary beneficiaries, the contingent beneficiary (if named) will receive the death benefit. However, if no primary or contingent beneficiaries are living, the payout is directed to the insured's estate, which can lead to probate and potential delays.
Can you dispute a life insurance beneficiary? It's possible to dispute or contest a life insurance policy. However, doing so requires a legal court process. Since the process is quite complex, you should hire an experienced attorney to help you out.
If you do not name a beneficiary, The Standard will pay the life benefit according to the “policy order.” This means your surviving spouse will be paid the benefit as the first person listed in the order.
Key takeaways
A life insurance beneficiary designation usually overrides a current spouse or a will. Spouses in community property states must split the death benefit with the named beneficiary. Review (and update) your beneficiaries any time your situation changes.
A beneficiary is generally any person or entity the account owner chooses to receive the benefits of a retirement account or an IRA after they die. The owner must designate the beneficiary under procedures established by the plan.
The easiest way to learn if you are a life insurance beneficiary is to talk to the policyholder if they are still alive. They can tell you whether you're a beneficiary and provide information necessary to claim the death benefit when they pass away.
If you are the designated beneficiary on a deceased person's bank account, you typically can go to the bank immediately following their death to claim the asset. In general, there is no waiting period for beneficiaries to access the money; however, keep in mind that laws can vary by state and by bank.