Who should I name as my beneficiary?
When you name a beneficiary in your life insurance policy, you make things much easier during a time when your family and friends will already be having difficult times. This will allow your attorney to handle the financial matters expeditiously without dragging government agencies into it unnecessarily. However, there are certain particulars to keep in mind when you do choose someone.
Points to Consider
The amount of money involved in the policy is going to make a difference. While it's not always the case, usually a young person has a hard time dealing with a sizable amount of cash all at once. If you think this might be the case, but want to leave it to a younger person anyway, then you may consider setting up a trust for them. This trust will manage the funds until they reach a certain age and can then legally claim it as an adult. From there, it is theirs to spend and invest as they will.
Your usual choices when it comes to choosing a beneficiary for the lasting length coverage you need include your family and friends. While it's not normally a friend per se, there may be some cases when your best friend is your family and would follow your wishes after you've passed away. If this is the case, then naming that person as the chosen legal benefactor of these funds is just as easy as naming someone you're actually related to.
Also, consider what it is that you want this financial amount to do. Do you want to provide for your children's education? Do you want to pay off a home for your spouse? Remember that these financial awards are usually tax-free for your spouse, so they will not be penalized by the IRS for receiving a large life insurance amount at one time. Of course, there may be specific processes you need to follow so ask your accountant if you're unsure exactly how to set it up. Once you have a goal or objective in mind, you can then set these in motion with your beneficiary designation form.
A Responsible Beneficiary
If you have specific things that you wish to be carried out, make sure you have chosen a beneficiary that will be responsible and reliable enough to handle them. This is one of the reasons why you might choose an older beneficiary to take care of certain procedures. Remember that it will be very easy for your family members to feel hurt if they feel like you are favoring one of them over another, so if there's something special you want to do, make sure to tell them why. You don't want to cause hurt at a time when the family will need healing the most. They will appreciate more hearing the reasoning behind such a decision and be able to respect it much easier, even if it's not what they were hoping for.
In order to avoid any confusion about the matters, make sure you have spelled out exactly which funds are to be disbursed from your inexpensive life insurance to which people. This will keep anyone from changing the beneficiaries, or amounts, or any other details that might have been left out, such as the timing of the gift. These facts need to be clear and understood so no one will take over the disbursement of the funds and then decide they would rather not. It will be important to find a trustee or beneficiary that will agree to these decisions and then stick by them, no matter what others may say to change or revise them.