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Designating a Beneficiary for Life Insurance
Abeneficiary is the person or entity you name (i. e., designate) to receive thedeath benefits of a life insurance policy. Some states require that yourbeneficiary have an insurable interest in your life or be related to you (atleast at the time the contract is initiated), while others have no suchrestriction. Ifyou do not want to name an individual or entity as your beneficiary, you canname your own estate. The proceeds will then be distributed with your otherassets according to your will. You should note, however, that naming yourestate as beneficiary may have disadvantages. For example, in many states, lifeinsurance proceeds are exempt from the claims of your creditors when there is anamed beneficiary, but not when your estate is your named beneficiary. Revocable and irrevocable beneficiariesThebeneficiary can be either revocable or irrevocable. A revocable beneficiary canbe changed at any time. Once named, an irrevocable beneficiary cannot bechanged without his or her consent. Primary and contingent beneficiariesYoucan name as many beneficiaries as you want, subject to procedures set in thepolicy. The beneficiary to whom the proceeds go first is called the primarybeneficiary. Secondary or contingent beneficiaries are entitled to the proceedsonly if they survive both you and the primary beneficiary. It's important toname a contingent beneficiary because if you and your primary beneficiary diesimultaneously, the Uniform Simultaneous Death Act provides that thebeneficiary will be presumed to have died first. By naming a contingentbeneficiary, you avoid having the proceeds flow to your estate. Multiple beneficiariesYoumay name multiple beneficiaries if you choose. There are no legal restrictions(and few company restrictions) on the number of beneficiaries you candesignate. Ifyou name multiple beneficiaries, you must also specify how much eachbeneficiary will receive. You may not want to give each beneficiary an equalshare,[link widoczny dla zalogowanych], so you must state how the proceeds should be divided. Because of thenumerous interest and dividend adjustments that the insurance company mustmake,[link widoczny dla zalogowanych], the death benefit check often does not equal the policy's face value. So, it's wise to distribute percentage shares to your beneficiaries, or todesignate one beneficiary to receive any leftover balance. How do you name or change a beneficiary? Whenyou buy life insurance, you will indicate your beneficiaries on theapplication. When changing a beneficiary, the insurer will provide you with abeneficiary designation form. Unless one or more of the beneficiaries isirrevocable, you only need to list the names of the beneficiaries, sign theform, and date it. This will automatically revoke any previous designations bywriting this in on the change-of-beneficiary form. Be sure to check and updateyour beneficiary designations upon certain life events (e. g., divorce, remarriage, the birth of children). Don'tmake the mistake of thinking that you can change your beneficiary in your will. A change of beneficiary made in your will does not override the beneficiarydesignation of your life insurance policy. If you want to change thebeneficiary of your life insurance, execute a change-of-beneficiary form. Donot rely on your will to do so. Why designating the proper beneficiary is importantYoushould name both primary and contingent beneficiaries. If you have not namedone or more beneficiaries, the proceeds pass to your estate at your death. Proceeds paid to your estate are subject to probate and will incur all of theexpenses and delays associated with settling an estate. But named beneficiariesreceive proceeds almost immediately after your death, and probate is bypassed. In addition,[link widoczny dla zalogowanych], proceeds passing to your estate are subject to the claims ofcreditors. Most states exempt life insurance proceeds from creditors whenthere's a named beneficiary. Other considerations when designating beneficiariesIfyou become incompetent, you cannot name or change a beneficiary. And you'reincompetent only if you are legally declared to be so. The test is similar tothe test regarding the making of wills or any other legal contract (i. e., doyou have the capacity to understand your actions? ). Donot name a minor as a beneficiary unless you also appoint a guardian in yourwill or use a trust. If you do name a minor as a beneficiary, and you do notappoint a guardian or use a trust, the probate court will appoint a guardianfor you. In states that have adopted the Uniform Transfers to Minors Act, it'spossible to create a custodial account of the minor after the death of theinsured to receive the child's share of the death proceeds. Yourright to change a beneficiary may be limited by a divorce decree or settlementagreement. In some cases, divorce allows a policyowner to change thebeneficiary, even if the beneficiary is irrevocable. In other cases,[link widoczny dla zalogowanych], thepolicyowner may be prohibited from changing the beneficiary or may be requiredto name a divorced spouse or children as irrevocable beneficiaries. If you're a minorInsome states, if you (the insured) are a minor, you can name only a certainclass of persons as beneficiaries. That class generally includes your spouse, parents, grandparents, and brothers or sisters. Your parents or legal guardianswill also have to sign the application for life insurance. Written byTerm Life Insurance Rates | Term Life Insurance Quote Online: BeamaLife.Topics related articles：


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