Purchasing life insurance is just one step in making sure your loved ones are taken care of financially after you’re gone.

Beneficiary designation is an equally important aspect of financial planning.  If you have no beneficiary on file, the benefit will be paid to your estate – it will go through probate and could be subject to claims from lenders before your heirs receive their benefit.

A few points to consider:

Review your beneficiaries at least every 2 to 3 years or after any major life event such as marriage or birth. Life is unpredictable, marital, job and parenthood statuses change. Make sure your beneficiary designation reflects your current wishes.

Name both a primary and a contingent beneficiary. Should the primary beneficiary predecease you, the contingent beneficiary would then receive the benefit. The contingent beneficiary is your “back up” beneficiary: consider who can step in and fulfill your wishes in the absence of the primary beneficiary.

Don’t assume that a will is sufficient. The United States Supreme Court has ruled that beneficiary designations supersede the provisions of a will or trust, even in the case of a divorce.

If you leave everything to your children in your will, but neglect to remove your ex-spouse as beneficiary on your life insurance policy, your ex-spouse will receive the life insurance benefit.

Minor children can’t legally receive a life insurance benefit.  A court-appointed guardian will most likely become the custodian of the funds (usually a surviving parent) which will delay payment. Consider leaving the benefit to an adult guardian or establishing a living trust or UTMA (Uniform Transfer to Minors) account. If no trust or guardian is appointed, the funds will be held by the insurance company (usually with interest) until the minor child becomes a legal adult.

Beneficiaries are most associated with life insurance policies, but retirement, HSA, bank and investment accounts can also include beneficiaries. Don’t neglect to review beneficiary designations for all your financial accounts!

Making and maintaining your beneficiary designations is a straightforward process that ensures that your wishes will be upheld for the care of those most important to you.

By: Jennifer Hannen Jen Hannen, Employee Benefits Strategist at Henriott. Jen can be reached at jhannen@henriott.com or 765-429-5006