Make Sure You Life Insurance Doesn’t Go to Your Estate

Generally, you designate a beneficiary for your life insurance when you purchase the policy. If you were undecided at that time, then you – or rather your estate – will be the beneficiary. Be sure to update your policy and decide on the best beneficiary or you’ll undermine a lot of the benefits that life insurance payout can give your eventual beneficiary.

When you update your beneficiary, you can name more than one and give each a specified percentage of the benefit. For instance you could leave 30% to each of 3 children and 5% to each of 2 grandchildren.

Using the estate as an intermediate beneficiary undermines a lot of the benefits that life insurance proceeds afford to ‘named’ beneficiaries. Proceeds are first distributed according to how the rest of the estate is divided according to your will; or, if you don’t have a will – according to your state’s distribution laws for intestate. 

Benefits to named beneficiaries versus leaving the policy to your estate:

Several immediate benefits for named beneficiaries versus your estate beneficiary are:

Remember to seek advice of a trusted tax professional on issues involving income taxes and an estate attorney on issues involving wills.

Give us a call so we can help achieve your estate planning goals.