How to Choose Beneficiaries for Your Life Insurance Policies

insurance policy paperworkWhen you purchase life insurance, you must also designate a beneficiary for your policy. This beneficiary is the individual who will then receive financial compensation upon your death. While it does sound easy enough picking a name, this is not a decision that you should make lightly. Beneficiaries are tied to your policy until you change them – and changing them is not always easy. Therefore, you want to take your time when designating a beneficiary, and possibly enlist the help of your attorney to correlate decisions with your existing estate plan.

Tips for Picking the Right Beneficiary

There are no rules to picking beneficiaries – and you are not required to select family members, either. When thinking about who you would like to receive compensation, here are a few things to keep in mind:

  1. Determine who you are going to help. The purpose of life insurance is to help a loved one after your death. This could be a child, spouse, or even a distant relative. Some people use their life insurance to cover unpaid business debts – so that they may leave it to a business partner. When picking your beneficiary, think about the financial welfare of your family and friends, and decide who you want to help with your life insurance payout.
  2. Know your options for beneficiaries. Your beneficiary doesn’t have to be a family member, or even a person. In fact, you can have a trust listed as your beneficiary. You can also list a charity. Charities are great options if your family is already financially taken care of, and you want to extend your family’s legacy by giving to others.
  3. Consider the beneficiary’s current circumstances. Realize that, though you are trying to help, giving someone your life insurance payout could actually hurt them. For example, family members who are disabled have a specific income level that allows them to collect disability payments from the state. If they were to receive your life insurance payout, they may no longer qualify for disability – something that they rely on to thrive.
  4. Always assign a contingent beneficiary. When you select a beneficiary, always assign a contingent or secondary beneficiary. This ensures that, if the initial beneficiary cannot receive your life insurance payout, there is another named in his or her place.
  5. Reassess often. Also, do not forget to reassess your beneficiary selections frequently to make sure that they are still applicable. As your life changes, and your loved one’s financial situations change, you may find that your initial beneficiary is no longer your choice in the future.

Speak with an Estate Planning Attorney for More Beneficiary Tips

If you are creating an estate plan, you need the assistance of a Long Island estate planning attorney. An attorney can help you designate the right beneficiaries and correlate them with your will or trust. To get started, explore your options by contacting the Law Office of Andrew M. Lamkin, P.C. today at 516-605-0625. You can also ask a question online.

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