Mistakes To Avoid When Designating A Life Insurance Beneficiary
There are many important components of estate planning and investing in a life insurance policy is certainly one of them. You can name a beneficiary on a life insurance policy who will receive the proceeds without the need to go through probate. Unfortunately, many people make some common mistakes when naming these beneficiaries. Below, our St. Petersburg estate planning lawyer explains what these are, and how to avoid them.
Not Naming a Beneficiary
While it may seem obvious, far too many people do not designate a beneficiary on their life insurance policy. Or, they may name their estate as the beneficiary. Either of these mistakes make the policy subject to probate, tying up the proceeds you may want to go to your family for months, or even years. During probate, the death benefits in the policy are also open to creditor claims, which could take a significant portion of the proceeds. Always make sure you designate a beneficiary on your life insurance policy, as well as an alternate beneficiary in the event that the first passes away prior to you.
Failing to Update Beneficiaries
While naming a beneficiary is important, it is just as critical that you update your designations periodically. Just as you update your entire estate plan after a major life event such as a birth, death, divorce, or remarriage, you should also update your life insurance policy beneficiaries at these times to avoid problems in the future. For example, if you named your former spouse as a beneficiary and change that, your new spouse may not receive the benefits of your policy.
Designating a Minor as a Beneficiary
Minor children in Florida cannot receive any property if the amount totals more than $15,000. If your life insurance policy exceeds this amount, the court will appoint a fiduciary guardian to manage the funds until the child turns 18 years old. The guardian will charge a fee and while a living parent can petition the court for the role, there is no guarantee that their request will be approved.
Even after your child turns 18 years old, you may or may not want them to receive the proceeds at this time. Instead, you have the option to create a trust for your child, name a trustee who will manage the death benefits, and include a provision of when you would like your child to receive the proceeds.
Our Estate Planning Lawyer in St. Petersburg Ensures No Mistakes are Made
Your life insurance policy is a critical part of your estate plan. However, it is important that you name appropriate beneficiaries and take other steps to ensure the proceeds are distributed according to your wishes. At Legacy Protection Lawyers, LLP, our St. Petersburg estate planning lawyer can provide the legal advice you need and make sure no mistakes are made so your final wishes are respected. Call us today at 727-471-5868 or contact us online to request a consultation with our experienced attorney and to get the legal advice you need.
Source:
leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0736/0736.html
