Appointing a person to handle money from a life insurance policy often only involves one decision, but this selection is one of the most difficult choices that many people must make. It is common for individuals to make errors, however, when making estate plans, which can result in life-changing mistakes. The following will review some of the most common mistakes that people make when deciding on whom to name as a life insurance beneficiary.
Mistake # 1: Failure to Update Your Policy
It is critical that people with insurance policies realize that these documents should not be abandoned or forgotten about after being written. Instead, a person should make sure to update a life insurance policy after every major life events including deaths and marriage. Not only is it possible that a person’s perspective on an individual might change, these events can also change how individuals can inherit amounts. Instead, the best advice is for a person is to always make sure that beneficiary choices are kept updated.
Mistake # 2: Forgetting Primary Beneficiaries
Some people decide on a suitable life insurance beneficiary, but fail to appoint an alternate person to act as a beneficiary. As a result, if something happens to a person’s beneficiary before the life insurance policy holder’s death, a court might have to designate someone as a beneficiary. For this reason, it is always a wise idea for a person who is creating an estate plan to name both a primary and alternate beneficiary.
Mistake # 3: Giving Money Without Any Conditions
It can be a particularly unwise idea to name someone as a life insurance beneficiary without placing any stipulations on how the amount will be inherited or what requirements a person must meet to receive this amount. As a result, many people find it a better idea to place stipulations on the receipt of a life insurance policy.
Mistake # 4: Government Ineligibility
Appointing someone who receives government benefits as a life insurance beneficiary places that individual at risk of becoming ineligible to receive those benefits. For example, any individuals who receive greater than $2,000 a month are disqualified under federal for Supplemental Security Income or Medicaid. A seasoned estate planning attorney can instead help create a special needs trust, which can allow the individuals on benefits to receive proceeds from a life insurance policy without becoming disqualified.
Mistake # 5: Minor Children
Most life insurance policies refuse to directly pay minors, which means that if a person has not created a trust or made plans for someone to control the money until the minor children become adults, a conservatory will likely be appointed which will result in spending an undue amount of money. The better option is to name an adult who can manage the trust until the minor children are of age.
Speak with an Experienced Estate Planning Attorney
If you live in Oklahoma and need the assistance of estate planning involving a life insurance policy, you should not hesitate to speak with attorney Jim A Lyon. Contact attorney Lyon today to schedule an initial free case evaluation.