You’ve put it off long enough, and now you’ve decided that making an estate plan is a wise decision. One step of the estate planning process is naming beneficiaries for your estate, life insurance, retirement plans and other financial assets you may have.
What’s a Beneficiary?
Simply put, a beneficiary is someone or other legal entity who receives money or other benefits from you. The money or benefits can be from your estate, an insurance policy or a retirement plan.
When you die, your beneficiaries receive money, personal items, or other kinds of property that you leave them. This property is distributed by your insurance provider or executor in accordance with your life insurance policy, trust, or will.
Are There Different Kinds of Beneficiaries?
When you set up your life insurance, you first designate a primary beneficiary. If you are married with adult kids, your spouse might be the primary beneficiary with your children listed as secondary beneficiaries. If something happens to the primary beneficiary (your spouse or partner), your kids would receive the distribution directly as the secondary beneficiaries. If you have minor children, ask your estate planning attorney about setting up a trust for your minor children. You can have multiple primary beneficiaries and multiple secondary beneficiaries. Make sure that you choose at least one beneficiary in each category.
How Do I Choose a Beneficiary?
Usually, people choose beneficiaries for very personal reasons. Before you choose someone to be a beneficiary, ask yourself, “Who are the most important people in my life? Whom do I want to provide for and care for as much as possible, even after I’m gone?”
A could be someone you love, whether it’s a boyfriend, girlfriend, long-time partner, or spouse. You may choose your child or children as beneficiaries. Perhaps you don’t have children, but you have young people in your life who mean a lot to you, such as nieces, nephews, or the children of close friends. If you don’t have positive relationships with your relatives, you could pick dear friends as beneficiaries.
However, choosing beneficiaries doesn’t have to involve emotional attachment. You might choose a beneficiary purely because they currently rely on you for support and would be left destitute if no provision was made for them in your will or insurance. You could also select a charity or an organization as a beneficiary.
Can I Change Beneficiaries?
Selecting a beneficiary doesn’t mean that your choice is set in stone. You can make changes to your estate plan or insurance policy whenever your life situation changes. For example, a marriage, a divorce, or a serious conflict between you and a friend could be cause for a change of beneficiaries. Just be sure of your decision before you contact your insurance company or call your lawyer.
Why Bother with Naming Beneficiaries?
If you don’t name beneficiaries for your assets, the courts may get involved and decide who your beneficiaries will be. Be proactive and makes those choices yourself instead of leaving them to strangers. Call your estate planning lawyer today and set up an appointment to ask your questions and discuss your beneficiary options.
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About Nicole K. White
After losing a close relative, Nicole witnessed the devastation, enormous expense and chaos caused by not having a simple estate plan. It is Nicole’s mission to educate parents, especially single parents, about protecting themselves, their families, minor children, and assets with comprehensive Estate Planning.
