Life Insurance Beneficiary Designation Information

Life Insurance beneficiary designations, have you ever heard of this before? Do you know what it is and why it is so important for you to understand? There are different ways for you to leave your death benefit to your beneficiary and you should know what they are and how they differ.

You can list a Trust as a beneficiary- Upon the death of the insured the trustee will administer the funds by following the instructions set in the trust provisions. While there are some advantages of naming a trust, there are also some disadvantages.
You can name Your Estate as a beneficiary- While there are reasons that you may want to name your estate as beneficiary often it is not desirable. The main disadvantage is that your death proceeds become part of the estate and are subject to the claims of creditors.
You can list a minor as beneficiary- This is a common practice to name your minor child as a beneficiary but please understand insurance companies will not pay proceeds to a minor. For this reason it is necessary and very important to name a guardian to be appointed to receive the funds on behalf of the minor. When naming multiple children as beneficiaries it is desirable to list a class designation. A class designation should be used whenever there are multiple beneficiaries that will be sharing a death benefit. In addition to the class designation there are definite benefits to using the per capita and per stirpes designations for children.
Per Capita- (means by the head or individual) the use of this designation means that each surviving child shares equally in the division of the death benefit.
Per Stirpes- (means by stock, family line or branch) the use of this designation means that the division of the death benefit will be split throughout the appropriate generations. This designation can become quite involved and full understanding of how it works is necessary.

This article was written not to explain how all the designations work but merely bring them to your attention. After reading this I hope you can see the importance of dealing with a life insurance agent that understands beneficiary designations and their proper use.