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.
Anyone who will suffer financially by your loss is likely your first choice for a beneficiary. You can usually split the benefit among multiple beneficiaries as long as the total percentage of the proceeds equal 100 percent.
More often than not, people select their spouse as their primary beneficiary, and then name their children as contingent, or secondary, beneficiaries. However, the age of your children will likely come into play here.
Most life insurance policies will not allow you to directly leave money to beneficiaries who are minors. If you name a minor as a beneficiary, they will have to settle the matter in probate court. In which an adult will be delegated to manage the money until the minor is old enough to be responsible for it themselves.
It's generally a bad idea to name more than one beneficiary, for two reasons. First, if you name your spouse and someone else as beneficiaries, your spouse loses the special benefits and flexibility they would otherwise have. Second, it complicates things.
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.
If you are married or in a common-law relationship of more than two years, your spouse is automatically your beneficiary.
If your sole beneficiary dies
If your sole primary beneficiary passes away, the death benefit would go to any contingent beneficiaries you named when you applied for your policy. In the event you didn't designate any contingent beneficiaries, the death payout would likely go directly into your estate.
Name both primary and contingent beneficiaries.
It's a good practice to name a “back up” or contingent beneficiary in case the primary beneficiary dies before you. Depending on your situation, you may have only a primary beneficiary.
The primary disadvantage of naming a trust as beneficiary is that the retirement plan's assets will be subjected to required minimum distribution payouts, which are calculated based on the life expectancy of the oldest beneficiary.
Listing your heirs makes it clear who inherits the account when you pass away. If your beneficiaries are already assigned to your accounts, the assets will pass to them by contract. If a beneficiary is not named, your heirs may have to go through probate, a legal process for settling an estate after someone dies.
Ineligible Beneficiaries: Minors: Generally, minors (individuals under the age of 18 or 21, depending on the jurisdiction) cannot be named as direct beneficiaries of a life insurance policy. In such cases, a trust or custodian may be designated to manage the proceeds until the minor reaches the age of majority.
Yes. Banks may require the beneficiary to provide a Social Security number (SSN) for monetary transactions. This requirement is intended to verify that funds are distributed to the correct designated individual(s) listed in a will, trust, insurance policy, retirement plan, annuity, or other contract.
In many cases, the spouse can inherit your house even if their name was not on the deed. This is because of how the probate process works. When someone dies intestate, their surviving spouse is the first one who gets a chance to file a petition with the court that would initiate administration of the estate.
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.
While some marital assets pass by default to the surviving spouse, some assets pass to the surviving spouse by way of beneficiary designations. There are two types of designations: payable-on-death (POD) designations and transfer-on-death (TOD) designations.
No, the oldest child doesn't inherit everything. While it will depend on state laws, most jurisdictions consider all biological and adopted children next of kin, so each child will receive an equal share of the estate, regardless of age or birth order.
If the policyholder would like to name multiple beneficiaries to a single policy, he or she can specify any number of “co-beneficiaries.” When multiple beneficiaries are listed, insurance companies can split the same death benefit amongst them.
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.
Not all bank accounts are suitable for a Living Trust. If you need regular access to an account, you may want to keep it in your name rather than the name of your Trust. Or, you may have a low-value account that won't benefit from being put in a Trust.
Combining accounts can help you maintain a good balance
At least once a year, it's smart to check and make sure you still have a mix of investments that's well balanced. This can be easier to do when you have only one account. When you have multiple accounts, there's a tendency to look at each one individually.