This seems an easy one when you take out a policy: Who do you want to benefit from your policy if you are unable to reap the reward yourself?
The thing is, it’s not always as simple as it sounds!
Here are some of our recommended best practices to consider when naming beneficiaries:
Always name a beneficiary. If you have a will, you probably think that your have your beneficiary covered, but this assumption can actually be wrong! You may be surprised to learn that in general, beneficiaries named in insurance policies and retirement plans will take precedence over any instructions you leave in your will. Therefore you need to ensure that you specify individuals as beneficiaries in your policies and plans.
Be specific. Another common mistake is using ambiguous language. It may seem weird but simply stating “my wife” or “my nephew” may not be sufficient. It’s always a good idea to use full names of intended beneficiaries in order to avoid potential confusion or disputes.
Name a secondary beneficiary. Make sure that it will be you and not your state law that determines who will be the recipient of your policy benefits. If your primary beneficiary should pass away and you have not named a secondary or contingent beneficiary, your insurance policy or retirement plan will be distributed according to your will. If you have no will, the decision will default to state law.
Keep important records in a secure place and tell a trusted family member what and where they are. Death can be quite sudden and many people die without leaving instructions as to where a will, insurance papers and other important records are kept. All too often, benefits go unclaimed because family members don’t know about potential benefits or can’t find important account information. Bank accounts and insurance policies are overlooked. Make sure someone in your family is familiar with your most important records and where they are kept.
