Life insurance
The beneficiary form controls the life insurance, not your will. These four mistakes send that money to the wrong place.
The beneficiary form controls the life insurance, not your will. These are the four mistakes that most often send that money to the wrong place.
Leaving the form blank, or naming your estate
If no living person is named, or the form says "my estate," the proceeds often have to pass through probate. That can delay the money and expose it to creditor claims. Name at least one primary beneficiary, and one contingent beneficiary in case the first person dies before you.
Leaving an old name on the form
A divorce, a death, or a new child does not rewrite the form. Colorado law changes some gifts after a divorce, but a life insurance policy does not always follow that rule, especially an employer plan. After a major life change, get the current designation from the insurance company and update it there.
Naming a minor child directly
A child under 18 generally cannot receive the proceeds outright. A court may have to appoint someone to hold the money, and the child usually receives whatever is left at 18, in one sum. A trust, arranged through estate planning, lets you choose the person who manages the money and set the ages and purposes for distributions.
Naming a person with a disability directly
A lump sum paid directly to a person who receives SSI or Medicaid can put those benefits at risk. A special needs trust can hold the proceeds so the money stays available for care without a direct gift.
This article is general information, not legal advice, and reading it does not create an attorney-client relationship. Laws change, and every family is different.