Naming Beneficiaries on a Life Insurance Policy

March 7, 2014

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Perhaps one of the most sensitive issues in managing a life insurance policy is in choosing beneficiaries. If we have been responsible enough to buy life insurance, we must also be responsible enough to appoint the best person to collect the proceeds, use it wisely, and fulfill our wishes as to how the proceeds should be spent.

One of the benefits of life insurance proceeds is that they can be collected with having to be probated. The beneficiary simply notifies the life insurance company of the death of the policyholder, and the insurance company processes the claim. A check is then issued to the beneficiary within a few days to a few weeks, after the insurance company has determined that the beneficiary has a right of claim according to the terms of the insurance contract.

If the policy being considered is to pay the final expenses of a burial, a spouse should be named as the beneficiary, since, he or she will be the one to make the funeral arrangements. Usually one beneficiary is needed, but the policyholder can name a contingent beneficiary, if the beneficiary dies before the policyholder has a chance to name another, or if both the policyholder and the beneficiary were to die together in an accident. The policyholder can change the name of the beneficiaries as often as he/she feels necessary.

For larger policies which are being created to fund a trust or to give money to multiple members of the family, the policyholder can name more than one beneficiary along with the percentage of the proceeds to which each has been assigned. In this way, the proceeds can be collected without having to go to probate and the proceeds are tax free.

It is important to choose a beneficiary wisely as this is going to be the person who will carry out your wishes. If you decide to tell the person you have chosen to be a beneficiary, it would be wise to make it clear how the money will be spent. It is also wise to have a will which will detail your wishes for the settlement of your estate. Many people have disputed the settlement of estates and the decisions as outlined in a will.

If a policyholder does not have a next of kin or does not wish to name a beneficiary from the family, he/she can name his/her estate as the beneficiary. In this way, when the estate is settled, the probate judge will disperse the funds according to his own discretion. As it takes two or three years to settle an estate, or maybe longer, the family will have to wait for the probate judge to make a decision. This could interfere with the funeral arrangements if there exists no other insurance or proceeds to pay these expenses. This is why a life insurance is necessary for the payment of final expenses.

The probate laws for each state are different and it is important for all the involved parties to know how the laws are interpreted. If there are questions, a lawyer can help ensure that the family follows the laws of the state and the instructions outlined in the will.


Financial Security for Single Mothers and Fathers

September 9, 2013

 

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Single mothers and single fathers need to plan for their financial security very carefully. Because there is only one parent, the parent has to give careful consideration as to how the children will consider their normal lifestyle, if something were to happen to the mother or father.

Because the single parent can only rely on one income, it is especially important to open an emergency fund to cover repairs on the automobile, emergency trips, and living expenses due to unforeseen events. This will help in time of need.

It is also important to designate a guardian in the event of the untimely death of the parent and to purchase life insurance to help cover the living expenses for the children. The addition of new family members could put an additional strain on the new family. A will would have to be created which would designate who the guardians will be. If guardians are not appointed, the state would designate someone who would be entrusted with custody of the children.

If the plan is for the children to go to college, the earlier the parent saves money toward this goal, the better. Since the children are relying on one income, parents can accumulate more money in interest if they start saving early. Additionally, there are state sponsored insurance plans available for the accumulation of college funding.

Some employers offer short-term and/or long term disability plans in the event of sickness or disease. However, the single parents should also consider a separate supplemental disability plan which would offer payments in addition to what the company offers. Often, the plan which is available at work is inadequate to continue paying for household expenses. One can secure a disability plan as a rider on some life insurance plans.

When purchasing health insurance at work, single parents should elect a plan with a low deductible and little or no copayments to protect the income. Since there is only one income, the single parent is more in need of a low deductible so that they can have the extra money for household expenses.

In conclusion, single parents need to be more responsible with their financial planning to ensure their families are protected in the event of emergencies and untimely death of the parent.