Taking out life insurance is an important financial matter everyone should attain to. However, what’s next on the agenda is selecting the appropriate beneficiary for your policy. Here are four tips on choosing the right beneficiary for your insurance policy.
Determine What the Money Should Be Used For
A major part in deciding who your beneficiary is, is to determine what the money should be used for. Will this be used to:
- Take care of your children?
- Pay off your medical expenses?
- Pay off other debts such as your mortgage or auto loan?
- Take care of your spouse?
- Pay off an old business debt?
Consider the person best suited to take care of this matter. You know if you have medical expenses to finalize that your beneficiary should not be someone who feels the government can cover it.
Be Careful if the Beneficiary Receives Government Benefits
Next, consider if this person currently receives any government benefits. Benefits such as disability or social security continue only if a person’s income remains at a certain level. Your life insurance death benefit would be considered income, and put their income over the top. They could lose their government benefits at that time.
Know That You Have Options
Also, know that you have options before selecting just whom you think is best. You determine while you are alive whom you want to receive the death benefit. Otherwise, the government may make up your mind for you.
- You can name multiple people to be your beneficiary
- You can set up a trust of which the trustee will administer the benefits
- You can donate it to a charity
- Your estate can inherit it all
Also, remember, that nothing in life is guaranteed. It’s always best to set up a primary and secondary beneficiary in case something happens to your first choice.
Name a Guardian to Distribute the Money on Your Childs Behalf
Finally, if you have children, do know that leaving your underage child as the beneficiary, your child will not receive the money until they are of legal age. Their legal guardian will have the say, and the court will appoint one if one is not set up already. So this person would make the necessary decisions such as paying for their education and if they continue the quality of life you provided.
Use the above four tips to carefully designate the best beneficiary(s) for you. This will impact exactly how you want your wishes to be carried out.
