What to Know When Designating a Life Insurance Beneficiary
NEW YORK, March 9, 2023 (Newswire.com) - Aflac: When you're getting life insurance, you'll need to decide who you'll designate as your life insurance beneficiary. This is the person or entity that you've legally selected to receive your policy's death benefit. Some of the types of people that can receive the benefit include a partner, a charity, and a trust. Here's what you should know about how life insurance beneficiaries work and who can receive your death benefit:
How life insurance beneficiaries work
Your life insurance beneficiary will receive the payout from your policy in the event of your death. You will provide a person's full legal name and their relationship to you. You may also have to provide a mailing address, date of birth, phone number, email, and Social Security number. The beneficiary can only be changed or corrected while you're alive, making it important to keep it up-to-date.
A life insurance company will generally allow you to have a primary beneficiary and a contingent beneficiary. The primary beneficiary is the person who will be first in line to receive the death benefit. A contingent beneficiary is a backup person or persons who will receive the death benefit if your primary beneficiary is deceased.
Who you can designate as life insurance beneficiaries
Here are a few types of people you may consider naming as the beneficiary of your life insurance policy:
Partner
Your spouse or partner can be named as your life insurance beneficiary if you think they will suffer financially because of your death. In some states, it's a requirement to list your spouse as the primary beneficiary to receive at least 50 percent of the benefit.1 Depending on the state, you may also be required to get your spouse's written permission to name someone else as the beneficiary.
Charity
If you're interested in donating your life insurance death benefit, you can name a charitable organization as one of your policy's beneficiaries. Some people choose this option if they know their other beneficiary won't need the full amount. You can give a percentage of your benefit to charity, or you can give the full amount.2 You could also choose to name the charity as your contingency beneficiary in the event your primary beneficiary can't accept the benefit. Be mindful that you don't receive any tax benefits for naming a charity as your life insurance beneficiary. If the charity owns your policy and you pay the premiums, you can claim a charitable deduction.
Trust
When you name a trust as your life insurance beneficiary, you have more control over how the death benefit is distributed. You can have your trust pay out a certain amount of your death benefit over time.
Let's say, for example, you wanted your children to have your death benefit. You could have your trust give 1/3 of the assets at age 21, another third at age 25, and the last third at age 30. It could help ensure they spend the money responsibly. You could also set guidelines for your benefit to be spent in certain ways, such as paying off a mortgage or covering your child's education. Keeping all this information in mind will help you make the best choice in choosing your life insurance beneficiary.3
[Footnote source]
1. Securian. "Naming a beneficiary: What you need to know."
2. Insurance companies may have limits on the amount you are able to designate to a charity based on your past giving history to the organization.
3. If you are worried about making a mistake when naming your beneficiaries, consult a financial advisor or attorney to ensure your intentions can be carried out as you wish.
Aflac coverage is underwritten by Aflac. Content within this article is for informational purposes and does not constitute legal, tax or accounting advice regarding any specific situation. Coverage may not be available in all states, including but not limited to New York. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies/riders have limitations and exclusions that may affect benefits payable. For complete details, including availability and costs, please contact your local Aflac agent. In Idaho, Oklahoma, and Virginia, Policies ICC64100-ICC64300 and ICC64500; Policies ICC1368100-ICC1368400; In Arkansas, Policies A64100AR‐A64300AR and A64500AR; Policies ICC1368100-ICC1368400; and Policy Q60100CAR. In Idaho, Policy Q60100CID. In Oklahoma, Policy Q60100COK. In Arkansas, Idaho, and Oklahoma, Policies ICC18Q60200C, ICC18Q60300C, ICC18Q60400C.
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Source: Aflac