Spring is the perfect time for a fresh start, whether it’s organizing closets, tackling home projects, or ensuring your life insurance beneficiaries are still aligned with your current wishes.
After all, keeping your beneficiaries up to date is one of the most important things you can do to protect the people you love.
Below are some of the most common beneficiary mistakes we see, and how we can help you clean them up this spring.
1. No beneficiary named
If you have not designated a beneficiary, your life insurance proceeds could be paid to your estate. This means your loved ones may face delays, probate costs, and potential tax complications that wouldn’t happen otherwise.
2. An ex-spouse is still listed
After a divorce, many people update their insurance policy itself but forget to update the beneficiary designation. In most states, your ex-spouse could still receive your death benefit if they are listed, regardless of what your will says.
3. Minor children named directly
While it makes sense to want to provide for your children, minors cannot directly inherit a life insurance benefit. If you name a child under 18 (or 21 in some states) as a beneficiary, and pass before they come of age, a court will appoint a guardian to manage the funds. It’s possible that the court-appointed guardian is not someone you would have chosen.
You can consider setting up a trust for minor children and naming a trusted guardian in your will to manage the funds until your children reach adulthood. This ensures the funds earmarked for any minor children are handled according to your wishes.
4. Forgetting about special needs considerations
If you have a loved one with disabilities who receives government benefits like Medicaid or Supplemental Security Income (SSI), naming them as a direct beneficiary could disqualify them from those programs. They would be forced to spend down the inheritance until they could regain eligibility.
You should take steps to determine if a special needs trust is appropriate for your situation. This allows you to provide financial support without jeopardizing their access to essential government assistance.
5. No contingent (backup) beneficiary
Life is unpredictable. If your primary beneficiary passes away before you do or is otherwise unable to receive your benefit, and you have not named a contingent beneficiary, your death benefit may end up in your estate. It could be subject to probate, delays, and potential creditor claims.
6. Outdated beneficiaries after major life events
Marriages, births, and deaths in your family can change who you want to protect. If you set your beneficiaries years ago and have not looked at them since, there is a good chance they no longer reflect your current wishes.
A beneficiary review can help ensure your designations remain in line with your wishes. It doesn’t take much time, but it can save your family significant stress down the road. I am here to help you review your policies, answer questions, and make sure your coverage reflects your life today, not five or 10 years ago.
If you would like to schedule a quick beneficiary review or have questions about your current designations, just reply to this email or give me a call. Let’s make sure your loved ones are protected the way you intend.
Fiduciary & Professional Disclaimer: TheBenefits.Guru Insurance Services is an independent insurance brokerage committed to acting in the best interests of our clients. Our advice and recommendations are strictly limited to the scope of insurance and employee benefits products. We are not attorneys, accountants, fiduciaries, or financial advisors, and the information herein is not intended as legal, tax, or investment advice. Please consult with qualified professionals in those fields for guidance specific to your circumstances.