When you are considering an annuity or life insurance contract, you usually must determine who will inherit your contract's value or policy death benefit. Like many of us, you may simply say, "We just want to leave it to the kids (or the grandchildren)." Be sure, however, you are making an informed decision, one that will truly reflect your intentions. Here are some important suggestions to keep in mind.
- Be especially careful when naming a minor as your beneficiary.If your beneficiaries are still minors when you die, they may face legal roadblocks to receiving or their portion of the settlement. This is because minors in many states are legally incapable of executing a contract. In addition, they cannot, for example, make withdrawals or choose among annuitization options.
- To assure your young beneficiaries receive their fair share of your contract (or policy) proceeds, consider setting up a trust for your beneficiaries. Alternately, you can formally name a trustee to oversee the distribution of the settlement money. Other options are available to you. So be sure to consult your attorney or accountant in addition to your financial professional.
- Periodically review your beneficiary choices to keep them up to date. It's no secret that families change. New babies arrive, and sometimes marriages don't survive. Careers can blossom with an unexpected promotion -- or vanish overnight due to company reorganization or downsizing.
The beneficiary choices and percentages that made perfect sense years ago can seem painfully out of date today. Just think of you own family. How much has it changed over the past 10 or 15 years? Don't you think it would be a good time to dust off any annuities or life insurance contracts you currently own -- and make sure your beneficiary choices are still up to date?
We could list other examples that show the importance of carefully choosing beneficiaries and periodically reviewing those choices. But your family and your financial situation are unique. So be sure to bring up the topic the next time you speak with your family's financial professional, attorney, or tax advisor.
Feel free to contact me for more information about choosing beneficiaries.