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You may find it an easy decision to purchase a life insurance policy. However, choosing who you want to designate as your beneficiary may be a more difficult task. You need to decide who should receive your life insurance benefits after your death.
Here are some guidelines to make your decision a little easier: Naming A Beneficiary One option is to name a beneficiary, which can be an entity or individual who will receive the benefits of your life insurance policy. You can even designate a trustee if you wish for your young children to receive the proceeds of your policy. You can choose a reliable person who can carry out such requests. Advantages of Selecting A Beneficiary Many policy holders choose to name a beneficiary in order to avoid any probate-related delays or expenses. Probate refers to the legal process that appoints an executor and validates your will. Another common reason is to ensure that your beneficiary will receive all of your policy’s proceeds. Because this is not part of your will, no legal or probate fees will be applied. Creditors will also be denied access to these funds. You may also be asked to choose a contingent when you are selecting a beneficiary. This is the person who will receive the benefits of your life insurance policy if your beneficiary dies before you. This way you can ensure you desires will be met if you are unable to complete the required paperwork to change your original beneficiary. Changing Your Beneficiary You can easily change the beneficiary designated in your life insurance policy. If you have chosen a revocable beneficiary—the most common choice—all you need to do is complete a form. If you have selected an irrevocable beneficiary, both the beneficiary and the policy holder must complete the required forms and agree to the change. Naming Your Estate If you select your estate on your life insurance policy, all proceeds of your policy will go to your estate. This refers to all of your possessions, including debts, assets and property at the time of your death. Your estate will distribute the money according to the instructions indicated in your will. Advantages of Naming Your Estate Policy holders often choose to name their estate so they can establish a trust fund for their children. They may also want to leave their money to specific charitable organizations. They indicate in their will exactly how much each charity should receive, and they provide the names of additional charities to use in case the original choices no longer exist. Importance of a Will If you name your estate as your beneficiary, you need to have a current will. This is a legal document that specifies exactly how your assets will be distributed after you die. If you fail to do so, the laws in your state will determine how to distribute all of your estate funds. Making Changes If you want to change the manner in which your estate is handled, you need to revise your will or create a new one. It is wise to consult a lawyer to ensure the document is legally valid. Only the individual who creates a will can alter how the estate proceeds are managed. As you can see, there are many differences to naming your estate or a beneficiary to receive the benefits of your life insurance policy. A beneficiary will receive all of the proceeds directly, creditors cannot access this money and no probate or lawyer fees are incurred. Your beneficiary can also decide how he/she wishes to spend the money. On the other hand, if you name your estate, you specify how you want your money to be spent in your will, your creditors may be able to access the money, and legal and probate fees will apply. |
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