Naming beneficiaries to a Florida based insurance policy should be easy. After all, one only has to consider who should receive the balance of the assets left behind, identify them in a will, and the rest should be simple. Unfortunately, there are unforeseen pitfalls that people fall into everyday.
This post will identify some of these hazards and how to avoid them.
Make sure your will matches your insurance policy – It can be tragic when your will names one beneficiary, and your insurance policy names another. You may intend to have insurance proceeds go to the person named in your will, but if they are not included on the policy, they run the risk of getting nothing. Simply put, the insurer is not bound by your will.
Update your will – This is especially important if you are divorced, or have stepchildren. The U.S. Supreme Court is reviewing a case where the ex-wife of a deceased person was left as a beneficiary even though they had divorced years ago. This left the current wife in a challenging position.
Avoid naming minor children as beneficiaries – Insurers will not pay proceeds to a child under the age of 18. This does not mean that children can never be named as beneficiaries. Instead, a trust can be created for the child’s benefit, so that they can receive money when they are able to handle it.
Creating hardships for disabled beneficiaries – Lifelong dependents who rely on Social Security benefits may lose that designation if they are beneficiaries who will receive substantial proceeds from an insurance policy.
Source: FoxBusiness.com, Naming life insurance beneficiaries – 10 ways to screw up, May 16, 2013