How to choose the beneficiaries of your life insurance
Beneficiaries of life insurance: what are
All life insurances, whatever they are, have something in common: they are based on a policy that stipulates that, upon the death of the insured, someone will receive compensation, also called a death benefit. Those final perceptors are the beneficiaries.
It is necessary to designate clear and unequivocal beneficiaries, so that when the time has come to pay the benefit for the sake of death, the insurance company has no doubt who should collect the money. In addition, carefully choosing beneficiaries will help alleviate tensions between successors once you have left.
Tips for choosing your insurance beneficiaries
In fact, you will be in your right to appoint whomever you want as a beneficiary, but you better think about it and take into account all the advice and assumptions we collect in this article. Choosing them is not as easy as it sounds: there are legal conditions, vital changes and other situations that can turn a simple choice into a problem.
The first thing you should know is who you can name as beneficiary:
Spouses. It's one of the most common options. Naming the husband or wife ensures that, upon the death of the insured, the other half of the couple will have sufficient financial support to move forward. You have to keep in mind the age of the spouse, because if it is too old it might be interesting to share benefits with other people. Ex-spouses, especially ex-wives, should also be taken into account: it is relatively common for divorce agreements for the judge to order a husband to contract life insurance whose beneficiaries are the ex-wife and the children in common.
Children. Children tend to be regular beneficiaries. With the profit money because of death, you can guarantee, for example, that you will be able to finish college. In fact, it is one of the frequent reasons for hiring term life insurance. [More information on term life insurance]. In any case, and as we will see later, you have to be careful if the children are still younger, because they may have difficulty accessing the benefit.
Trust Fund. You can leave a trust fund as a beneficiary and appoint an administrator to manage it according to your instructions. It's a very appropriate way to get the money to serve exactly what you want.
Parents. Many insured appoint their parents as beneficiaries, especially if they are older and depend on their help in surviving. However, age can be a problem and you need to consider it if they are too old or to replace them with other beneficiaries if they die.
Bank. On many occasions, banks require customers to subscribe to life insurance policies as support for loans or mortgages. If the client dies, that insurance will serve to the bank to collect the outstanding debt.
Charity. Many people appoint charitable institutions (NGO's, associations, foundations...) as beneficiaries of their life insurance. It's a way of practicing solidarity and leaving a memorable legacy.
Companies. Companies tend to hire life insurance for some key people in the organization, such as homeowners. In that way, his death does not imply such a strong economic breakdown. Some insurers offer specific insurance modalities to cover these contingencies. In other cases, it is simply that the insured decide to appoint companies as beneficiaries.
Inheritance. There are people who, instead of naming specific beneficiaries, decide that their death benefit will become part of what they leave as an inheritance, thus giving themselves to potential heirs.
In any case, choose who you choose, remember that you can designate all the beneficiaries you want. That's right, you'll have to order them. That is, if you decide that there is more than one, you will have to decide how much money each receives. This division allows the recipients to be organized into three categories of beneficiaries:
Primary. Primary beneficiaries are the first line of people who receive the benefit by cause of death. That is to say, those who you name as first to collect when you die.
Side. The secondary beneficiaries are the ones who come to receive money if the primary ones have died. You must make it clear who those second-line beneficiaries are.
Tertiary. In extraordinary cases, a third line of beneficiaries can be reached. If there are no primary and secondary, the tertiary can be counted to receive compensation.
In addition to deciding who are first, second and third order beneficiaries, you can also decide how you want them to be relieved. That is to say, it is up to you, as insured, to plan how those beneficiaries are happening. There are two main forms: per capita and per stirpes.
Beneficiaries per capita. In this case, you decide which specific people occupy the primary, secondary and, if necessary, tertiary posts. There's no need to be any relationship between those people, you just choose the names.
Beneficiaries per Stirpe. With this modality, if a beneficiary – primary or secondary – dies, the right to compensation is passed on to his heirs. In other words, to their lineage or family. You do not choose who it is to continue the chain, but it passes as an inherited right to the successors of your primary beneficiary.
Tips for choosing your insurance beneficiaries
If you are already clear about what is a beneficiary of life insurance, now we are going to give you some guidelines to choose yours with caution and not make mistakes. He thinks that the death benefit can be a very high amount of money, something that can sometimes cause more disturbances than joys. Keep these tips in mind when deciding who you name as the beneficiary:
Study the circumstances of the beneficiary. Even if you think that leaving money to someone is always a joy, certain people can cause a displeasure. For example, if you name as a beneficiary a person who receives state aid or subsidies for a disability, you can cause him to lose that benefit because of the increase in income level that will be the compensation. Always keep in mind the circumstances of the people you want to leave as recipients of your benefit by cause of death.
Watch out for the juveniles. It is natural for a parent to want to appoint their children as beneficiaries, but it can be a problem. In general, minors (18 or 21 years of age depending on the state in which they live) are not directly charged with compensation, but the money will have to go to a trust fund. And if you haven't appointed a fund manager, a court will have to do so, which can be a significant delay in the delivery of the money. Make sure you have the options you have if you are going to appoint minors as beneficiaries.
Charitable institutions and organizations. You don't have to leave as beneficiaries to natural people. You can choose non-governmental organizations, charities or entities. It is a good idea when your family or loved ones no longer have economic problems and, after your death, you want to leave an enduring legacy.
Trust Fund. A very common option is to leave the money in charge of a trust fund run by a manager. This person will take care of your will with the money: give it to whom you determine and when you decide; Give it to charitable works, etc.
Incorporate it into your inheritance. If you prefer, you can decide that the compensation money will thicken your inheritance, so that it is divided between your heirs when the inheritance is accepted and distributed. As you will see later, it is an inadvisable idea, because it can produce delays in the collection and other drawbacks.
Choose beneficiaries. Don't forget to choose who your beneficiaries will be, but, above all, don't forget to choose the secondary beneficiaries and, if your policy allows, the tertiary ones. If you die and there is no one designated to collect, the money will end up in the insurance company.
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