How to Choose a Beneficiary
Choosing a beneficiary for your life insurance policy or retirement fund is a tough decision. There are a number of factors that need to be taken into consideration, such as whether or not you have minor children at the time you begin the policy and who you know that may need the money the most when you pass away. A beneficiary does not always have to be a person and may be your estate, a charity or a nonprofit organization.
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Instructions
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Evaluate your situation, taking into consideration factors such as your marital status and children and dependents in your care. It is imperative that if you have family that depends on you financially, they are listed as beneficiaries in the event if your death; otherwise, they will not be included.
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Choose a responsible, trusted party who understands the necessity of fair distribution required to cover the cost of your death and funeral expenses, to settle your estate and to ensure that your surviving dependents are financially secure.
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Choose multiple beneficiaries in the event that you have more than one child who depends on your financial contribution to survive. The option to have multiple beneficiaries creates a line of reception, with the primary beneficiary being the first in line to receive benefits in the event of your death and contingent beneficiaries next in line. For example, a primary beneficiary may be your spouse, with the secondary beneficiary being one of your children. In a case when the primary beneficiary dies, the benefits would go to the secondary beneficiary. This system protects your immediate family.
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Name your estate as the primary beneficiary in the event that you have a structured will that designates the distribution of your assets. Upon your death, your benefits will automatically go to your estate for distribution as specifically detailed in your will.
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Tips & Warnings
Check the laws in your state regarding naming a beneficiary in the event that you are married. Some states may require your spouse to sign a waiver if you choose to name someone else as a beneficiary.
Review your policy before signing. In some instances, the more specific you are about a beneficiary, the more trouble might arise in the event of a divorce. For example, if you list your spouse as a beneficiary and later divorce without updating your policy, then even if you remarry your current spouse may have a difficult time accessing your benefits because he was not named on the policy.
Not naming a beneficiary could leave your funds in the hands of the state, which may not distribute them as you would want them distributed.
