The type of policy has no bearing on the beneficiary designation, whether the policy is Whole Life, Universal Life, or Term Insurance. However, be sure to legibly list the correct names of your beneficiaries on all your group, life, and investment policies. Otherwise, it could cause great confusion. A plan owner can have one or multiple beneficiaries, and there is no cost to changing the beneficiary. If you name an underage beneficiary, it is wise to list a trustee. The trustee would look after the funds until the beneficiary is 18 years old.
Any changes you want to make, you must complete on the correct forms for them to be valid. Marriage does not automatically change beneficiary designations. It must be in writing. It is also good to get confirmation of a change and to review all areas that have a beneficiary to make sure it is who you want it to be.
Example: A client has a policy set up and follows the protocol for a divorce. The ex-spouse receives coverage in the way of Life Insurance if the policy owner dies.
The portion decreases each year by 15%, which means the owner can restructure the portion each year by an additional 15%.
In this instance, if 45% goes to the ex-spouse, then 55% now goes to the owner. The owner can designate that 55% to the newly appointed beneficiary.
The next year it will be 30% and 70%. 30% to the ex-spouse and 70% to the policy owner or new beneficiary.
The subsequent year will be 15% and 85%. Until, finally, 100% is the owner’s choice.
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