Choosing and Naming Life Insurance Beneficiaries in Virginia
Buying a life insurance policy is a gift to yourself and those you love. Perhaps your goal is to provide funds for your family to pay the bills after you are gone or to fund your children’s college education.
Whatever your goal, when purchasing life insurance, it is imperative that you choose and name beneficiaries for your policy and that you put some good thought into it.
To help you choose the right life insurance beneficiaries, here is a brief explanation of what a life insurance beneficiary is, why naming life insurance beneficiaries is important, and who you can choose as a beneficiary of your life insurance policy.
What is a Life Insurance Beneficiary?
A life insurance beneficiary is an individual or entity that you name in your life insurance policy to receive the proceeds of that policy after you die. Your primary life insurance beneficiaries are those to whom the proceeds of your policy will be paid first, typically your spouse, adult children, or siblings.
Your contingent or secondary life insurance beneficiaries are those who will receive the proceeds of your policy if all of your primary beneficiaries have already died or are otherwise unavailable or unwilling to receive the proceeds. Your favorite charitable organization is an excellent choice of contingent life insurance beneficiary.
Why Naming Life Insurance Beneficiaries is Important?
If you fail to name a beneficiary in your life insurance policy, then after you die, the proceeds will typically revert to your estate. However, you should avoid having your life insurance policy revert to your estate because the proceeds would then be tied up in the probate process.
Probate can take a very long time, and your heirs will not receive the life insurance proceeds until it is complete. Probate is also a public process that will expose the contents of your estate and its affairs to public scrutiny.
Normally, life insurance proceeds are exempt from probate and creditors, but only if they are not included in your estate. Otherwise, creditors and claimants will be paid off from the life insurance proceeds before they are distributed to your heirs.
Who Can You Choose as a Life Insurance Beneficiary?
You can choose just about any individual or entity you want as a beneficiary of your life insurance policy, including but not limited to:
- An individual, like your spouse or partner;
- Multiple individuals, like your adult children or grandchildren; or
- A legal entity, such as your estate, company, favorite charitable organization, or a trust you created.
Furthermore, you can name more than one primary or contingent beneficiary and distribute the proceeds of your life insurance policy to as many beneficiaries as you like.
So, Who Should You Choose as a Beneficiary of Your Life Insurance Policy?
When choosing beneficiaries for your life insurance policy, there are many things you may want to consider, most importantly:
- Who would you like to help financially after you are gone?
- Who will be in charge of settling your debts and paying your funeral expenses?
- Who currently relies on you for financial support?
You may also want to consider the age of the potential beneficiary. It is common for parents to want to leave money to their children. However, since children in Virginia cannot inherit in their own names until they are 18 years old, you may consider creating a trust with your children as the trust beneficiaries, and then naming that trust as the primary beneficiary of your life insurance policy.
It is also important to understand that there are very few legal grounds upon which the beneficiaries named in your life insurance policy can be challenged, and they are even less likely to be invalidated in court than your Will. What’s more, if the beneficiaries named in your Will conflict with the beneficiaries named in your life insurance policy, your life insurance policy will always prevail.
Consult With an Experienced Virginia Estate Planning and Probate Attorney
Your choice of life insurance beneficiaries should align with your overall estate planning goals. An experienced Virginia estate planning attorney can help you evaluate your life insurance needs, including choosing the right beneficiaries.
Call our law firm today at (703) 553-2577 or use the contact form to arrange a consultation with an experienced Virginia estate planning attorney.
The information on this site is for general informational purposes only. The information presented in this site is not legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this site.