20 Dec Choosing a life insurance beneficiary in 2020
Fashion designing icon Karl Lagerfeld died earlier this year at the age of 85. The world lost a true trendsetter who eventually set another trend upon his demise. Lagerfeld’s feline family member, Choupette, continues to live a life of luxury, and will do so throughout 2020 and beyond, thanks in part to a life insurance plan put in place prior to the designer’s death. Lagerfeld felt his cat deserved to remain in a lavish lifestyle, therefore, he made sure it remained in one by putting his wishes in writing and including his desires in a life insurance policy.
A beneficiary is the person, entity — or pet — slated to receive the benefits from your life insurance policy, a document which is designed to help pay any bills or other debts left behind after you’ve passed away. Having a life insurance plan in place will help to ease the burden from your family if you’ve left a substantial amount of debt to pay. Such debt includes, a car note, a mortgage, credit cards, business expenses if applicable and funeral expenses.
Your demise will allow the beneficiary to collect money and other assets as you’ve described in your life insurance policy, so choose wisely. Choosing the best life insurance beneficiary in the coming year does not come without concerns. Who gets the cars? The house? What about the business and other assets? No matter who — or what — you consider as family, choosing a beneficiary to receive some or all of your estate must be done in a way that truly allows for resting in peace. Keep the following in mind when choosing the best life insurance beneficiary in 2020:
1- If you’re getting a divorce…
There are at least two things we don’t care to discuss when we talk about the upcoming year: death and divorce. But both are a part of life and both command proper planning to keep the drama at bay. If you’re divorced or getting a divorce next year, you’ll want to reach out to your life insurance broker to discuss changing (or keeping) your wishes to your liking. If you have minor children, they might not qualify as life insurance beneficiaries, at least not the way you’d hope for. Until they reach 18 or 21, depending on the state, your kids cannot receive any money directly. You will have to create a life insurance trust and appoint a guardian to manage the money and divide it among the children upon your demise. They will not be able to directly receive the money until they’re legal adults, age 18 or 21, depending on the state in which they reside. If your children are under 18, it’s a good idea to establish a life insurance trust and appoint a guardian to administer the proceeds. Failure to appoint a guardian and establish a trust could result in a judge deciding who will manage your money after you’re gone. Your assets could end up where you’d never imagined.
2- You have options.
Even in 2019, most people still think of only their spouses and children when considering a beneficiary. Lagerfeld thought of his cat; you too should think outside the box in 2020. When choosing a beneficiary, think about one or more of the following: a good family friend, two or more people, the trustee of an established trust you’d put in place, a non-profit organization, your estate that would be managed by whomever you’d deem reliable, a back-up beneficiary. By broadening your options in a beneficiary, you’ll feel at peace knowing your true wishes will be met when you are gone. Should you decide on two beneficiaries, the first one appointed will become the primary beneficiary and the second one chosen will become the secondary beneficiary. It is important to be careful in choosing a primary and secondary beneficiary; the former gets the insurance benefits upon your demise while the latter receives them if the primary is unavailable.
3-Your intended beneficiary could lose other benefits.
The Social Security Administration is the agency responsible for the disbursement of Supplemental Security Income (SSI), and the office has put rules in place for would-be beneficiaries who are named to receive your life insurance payout after your death. Beneficiaries who qualify for SSI could have their life insurance benefits reduced or suspended altogether if the payout causes their income to increase. The beneficiary could become disqualified based on program eligibility. He or she should contact a local SSI office for any updated program requirement details. Many people you may know qualify for SSI, such as persons of a certain age, those who are legally blind, and those with a physical or mental disability. If your life insurance benefit outweighs the benefits of SSI, the beneficiary might not have a problem losing the SSI. But you’ll want to discuss this with him or her before you decide to choose your beneficiary.
Although you may want to think about it later in life, choosing a life insurance beneficiary is a must if you care about who is cared for financially and who will take ownership of the assets you’ve worked hard to obtain. Choose one or more beneficiaries carefully, while you’re still alive and able to make sound decisions, and keep in mind the tips I’ve outlined above for the best beneficiary choices in 2020. Remember to keep the laws in your state in mind when choosing a beneficiary under the age of 18, over the age of 65, and anyone who has a disability and qualifies for SSI.
Additionally, be as specific as possible, when choosing a beneficiary. For example, do not simply name “the children” as your beneficiaries if, honestly, you do not want all your kids to receive your benefits. Make sure to divide your policy as you’d like — perhaps one relative or another intended beneficiary should receive more or less than another. It’s totally up to you, even if your choice of beneficiary leads you to naming a beloved feline as a grantee.
We are here to help you choose the best life insurance policy and beneficiary and look forward to serving you.