Beneficiary Designation Mistakes you don’t want to make…
A beneficiary is the person or entity that receives the proceeds of the life insurance policy when the insured person dies.
In most states, naming an estate as beneficiary of your life insurance proceeds, brings an unpleasant fate to those benefits. When proceeds become part of the insured’s estate, this means the proceeds are not exempt from the estate’s creditors and are subject to probate. (note: laws in most states’ have an exemption from the claims of creditors for life insurance payable to named beneficiaries, such as: spouse, child(ren), parents, sibling or loved one.).
-Death taxes and administrative expenses can also claim a large portion of these benefits. Expect delays and additional expenses that other wise would NOT be present if the proceeds were paid directly to a named beneficiary.
-When an estate receives proceeds this may increase the size of the probate estate and may result in higher executor and attorney fees.
-State inheritance taxes are usually at a higher rate than if the proceeds were payable to a named beneficiary.
Basically when the estate receives the benefits from your life insurance policy… Those who receive money from the numerous taxes, administrative fees, attorney fees, executor fees, etc… Really seem to be ones who benefit from the Life Insurance proceeds. In my opinion this seems to defeat the purpose of purchasing the life insurance policy in the first place. Usually (and I do say usually because there can always be a situation where this is not the case) a person purchases a life insurance policy for one or all of the following reasons:
- Protect loved ones from financial devastation
- Provide a financial gift
- Cover final expenses
Don’t forget the importance of a second beneficiary and/or an annual policy review. For the simple fact if the designated beneficiary fails to survive the insured, then the policy is payable to the insured’s estate.
Taking the time to plan for the unexpected provides loved ones and yourself peace of mind. Start by Integrating your life insurance as port of your estate and financial plan. Work with your financial representative to find the best way to achieve your goals for the one’s you love most.
Note: This blog is designed for general information purposes only. All information presented on this site should not be interpreted as legal advice and the author assumes no responsibility or liability for the actions taken or not taken by the readers based upon such information. For legal and tax advice contact your attorney or tax adviser.
Rita Sollie, Direct Insurance Representative with North Coast Life Insurance Company (NCL). No gimmicks or schemes here, just genuine and honest service. We don’t sell insurance, we solve problems. I welcome the opportunity to show you what NCL can do for your Life Insurance and Financial needs.
View INSTANT Term-Life Quote: www.insureyourfamily.com
If you prefer to speak with a local financial representative, call or email your request and you will be connected with a representative in your area.
Contact info: Phone: 800.541.5858 Email: firstname.lastname@example.org or Live Chat below.