Who Should Be The Beneficiary Of Your Life Insurance Policy?

It is normal to seek financial protection against harmful events and their consequences. So many people are living under the protection offered by life insurance policies. These contracts are sometimes the only line of defense against bankruptcy when the policyholder dies. Before sending any application paper, search for online quotes for all policies, including no physical life insurance quotes.

compare-300x191Naming your beneficiaries is another delicate issue and deciding who should be the beneficiary of your life insurance policy must be done wisely.

The normal and natural choice is to name our spouse and children as direct beneficiary. Normally they are the only ones depending on you and allowing them to receive all the insurance policy proceeds seems logical.  Usually we choose the spouse instead of children, especially if they are young. Still there are certain things you should be aware.

If you name your spouse as beneficiary, the proceeds can become subject to the claims made by the current or future creditors of your spouse. Also, if your spouse gets married after your death, the next spouse can also claim a part of the proceeds or use its influence to obtain and deprive your children of the proceeds.  The advantage is that your spouse will know better how to administrate your savings. She or he will gain easy access to cash and will pay the bills, including the funeral expenses.

Also, if you choose to name a Revocable Living Trust as primary beneficiary, the proceeds will pass to a “B Trust” (or Bypass, Family Trust or Credit Shelter). In this way your spouse will take full benefits of your savings and will be protected against lawsuits, creditors or claims made by a new spouse.

Naming your children is another option, especially if want to make sure that they will receive all funds needed for education.  If they are grown up, you can name your grandchildren, if you have ones. Other possible beneficiaries: revocable trust, your estate, testamentary trust or you can donate money to an orphanage or a charitable organization.  No matter whom you choose, talk first with professional advisors and check all your possibilities.

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