It’s more important than you think
Naming a beneficiary is a valuable feature of life insurance and segregated funds policies so it is important to carefully choose your beneficiaries.
Estate – the default choice
Many people choose to name their “estate” as their beneficiary. Although this is an easy short-term solution, it is important to review the risks of doing this. If you are stuck for a significant “other” beneficiary, don’t forget to change it to a more appropriate option later. Why?
What’s in a name?
Simply naming an individual or trust as beneficiary will keep the proceeds out of the insured’s estate and also protect the death benefit from the claims of creditors or litigants.
VIP Beneficiary
A “preferred beneficiary” is a spouse, parent, child or grandchild and receives VIP treatment in the form of protection. All the proceeds of the life insurance product (including Segregated Funds) are protected against claims of the creditors or litigants of the life insured not only upon his or her death, but any cash values in that policy are also protected during the lifetime of the insured.
Trust your trustee
Think carefully about to whom you assign the task of trustee. It can be a difficult role to fill, often challenged by trying relationships. Be sure to discuss the role with your intended trustee and make sure they are comfortable with it and understand the responsibilities of the role.
Contingency Plan
Often parents of minor children are concerned about would happen should they both tragically pass away at the same time. For this reason, the children are often named as “contingent beneficiaries”. If the children are minors, the trustee named to act on their behalf, will receive the proceeds directly upon the death of their parents avoiding any estate considerations.
As life changes, so do beneficiaries
If you have an older life insurance policy it is probably a good idea to review the named beneficiary as your circumstances may have changed.
It may be time for a change if……
The need for life insurance no longer exists
Often, older individuals find they have no one to whom they wish to leave their insurance proceeds. In this situation, naming a registered charity will provide a charitable tax deduction in the full amount of the proceeds at death.
Let’s review your beneficiary designations and make sure your life insurance proceeds end up where you want them to be. As always, feel free to use the sharing icons below to forward this article to someone who might find it of interest.
Tony Watson
Financial Advisor
9367 Webster Place
Sidney, BC
V8L 2R9
Tel: 250-589-0515
Email: [email protected]