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  • Lynn K. Girvin, Esq.

Tread Carefully: Naming Life Insurance Beneficiaries

Certain assets avoid probate because the owner of the asset is able to name beneficiaries who will receive the benefit at the owner’s death. Life insurance is one of those assets. So when you create a Revocable Trust as part of your estate plan it is really important to update the beneficiaries of your life insurance policies to reflect your wishes and have it work with your overall plan. Here is some general information for you to consider.

Naming Life Insurance Beneficiaries for Married Couples

Only a small handful of married couples need to think about tax planning given the relatively high estate tax exemption of $5.45 million (for 2016 and adjusted yearly for inflation). If you are married and estate taxes are not a problem for you, then naming your spouse as the primary beneficiary is usually the best choice. This will give your spouse immediate easy access to funds in order to pay bills. When it comes to naming a contingent beneficiary there are a couple options: one is to name your adult children and another is to name your Revocable Trust. Naming your Revocable Trust is a great choice if you have minor children, spendthrift beneficiaries, estate tax concerns, or simply want to control how the assets are distributed at your death.

Naming Life Insurance Beneficiaries if You Are Single

If you are single, then regardless of whether you need estate tax planning, naming your Revocable Trust as primary beneficiary of your policies is a great idea. Naming your Trust will insure that your estate has enough cash on hand to pay for debts and expenses at your death in addition to providing the details of where you want the money to go. Again, if your estate will be dealing with any minor beneficiaries, spendthrifts, or any incapacitated beneficiaries then you are covered. Your Revocable Trust insures that those issues are dealt with.

Irrevocable Life Insurance Trust

If you are one of the lucky few who has estate tax concerns, whether you are married or single, consider setting up an Irrevocable Life Insurance Trust (ILIT). An ILIT removes the value of the insurance from your estate so it isn't subject to estate tax and you are able to leave more to your loved ones.

*This discussion is intended to provide you with general information about life insurance and does not include all of the variables in determining how your estate plan should be prepared. Before making and changes you should consult with your estate planning attorney to determine the best options for you and your family.

Call Lynn K. Girvin today to ask about how you can plan for your family! 949.887.8707.

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