There may come a point when you decide that adding a life insurance policy to your estate plan in Minnesota makes good sense. While this is a great idea, as it can provide your family with financial peace of mind, there is something to consider: the beneficiary.
Some people have no problem choosing a life insurance beneficiary. For example, they select their spouse and move on with other areas of their estate plan. Then there are people who don’t know where to start.
Here are several of the most common mistakes you can make when choosing a life insurance beneficiary:
— Naming a child who is a minor. This is a mistake because life insurance companies will not make direct payments to a minor. If you do not have a trust in place, the court will appoint a guardian.
— Assuming that your will is the end all. A life insurance policy has nothing to do with your will. Even if your will says differently, the beneficiary on your life insurance contract is entitled to the death benefit.
— Forgetting to review and make changes as necessary. For example, a divorce may call for a change to your life insurance beneficiary. If you neglect to do this, the wrong person may end up with the money when you pass on.
These are some of the most common mistakes associated with choosing a life insurance beneficiary.
If you want to avoid these mistakes, don’t hesitate to review your life insurance policy. Along with this, put a lot of time into considering who the beneficiary should be.
Source: Nasdaq, “Naming life insurance beneficiaries: 10 ways to screw up,” accessed Jan. 27, 2016