Who Can I Name As My Beneficiary?
Tuesday, 17 December 2019
Let’s start off with what is a beneficiary? A beneficiary is someone you designate to inherit assets after you have passed away. These assets could include any life insurance payouts, or the remaining balance of a retirement account. This can help your beneficiary pay for things like mortgage, outstanding debts, life expenses and any daily bills. Your beneficiary can be one person, or several people, it is up to you.
Who can be a beneficiary? Most of the time, people name family, such as spouses or children as their beneficiaries because these are the people who may need the most help financially after their significant other or parent has passed away. For most, when they buy life insurance, they usually have someone already in mind that they would like to protect. It doesn’t have to be an immediate family member, but someone who you feel will need financial support when you pass. If you don’t think there is anyone in your life specifically who would necessarily need the money, you can choose to name your favourite charity as your beneficiary.
Primary Beneficiary vs Secondary Beneficiary
A primary beneficiary is someone who would inherit the assets first. A secondary beneficiary is someone who would inherit the assets second. If the primary beneficiary cannot or will not accept the inheritance, it would go to the secondary beneficiary, also called the contingent beneficiary. A primary beneficiary could not accept the inheritance if they were to pass away before being able to receive them. For example, most people will make their spouse their primary beneficiary, and their children, or legal guardian a contingent beneficiary. Again, multiple contingent beneficiaries can be named, it is up to the owner of the assets. It is always recommended to have both a primary and contingent beneficiary on your life insurance policy.
Revocable vs Irrevocable Beneficiarieshttps://www.thebig.ca/life-insurance
A revocable beneficiary means that you are able to change the beneficiary on your policy whenever you want.. It is important to make sure your policy is always up to date, and that a divorce nor a change in will, will not change the beneficiary on your insurance policy. You can change the beneficiary without consent of the previously named beneficiary. This is always the most simple and safest choice to avoid legal issues that can occur with an irrevocable beneficiary.
An irrevocable beneficiary is the opposite and cannot be changed. You need the consent of the original beneficiary in order to change your policy, so make sure you are making a very careful decision with this type of beneficiary. When making this decision, speak closely with a financial advisor to get the best advice on who to name as your beneficiary.
Making a Minor your Beneficiary of your Life Insurance
If you want to make your beneficiary your children or grandchildren, great choice! However, there are a few things that can make this difficult. If your children or grandchildren are minors before they receive this inheritance, they cannot have control over the money that is left to them until they turn 18. In this case, you need to establish a trust, and appoint someone who will oversee this account for them. This way, the person you name to look over the account can give guidance and control to ensure the funds are used in a responsible way to benefit the child in the long-term. The person in charge of this account is known as the trustee and is responsible for keeping records of all dealings with the money, transferring the total amount to the child when they turn 18. When leaving your life insurance policy to a minor it is important to work with a trusted lawyer or financial advisor to get advice to set up a trust for your beneficiary.
When you have multiple beneficiaries it’s a good idea to designate a percentage amount of your life insurance payout rather than a dollar amount. This way it will be easier to divide up if the amount ends up being less or more than originally planned. Additionally, it is very important to make sure your policy is always up to date! Any time a major life change happens, whether it is getting married, having more children, buying a new house or anything similar, update your policy. Ensure that whoever you make your beneficiary is aware. It is important to bring up questions and discussions that can clarify that everyone is on the same page.
No matter what your personal situation is right now, buying a life insurance policy sooner rather than later in life will help you save money in the long run. We know life insurance is a very big deal, so we want to help as much as possible. Whether this is new to you, and you just want to learn or if you want someone to take a look at your current policy, let us know!