How Do I Pick a Life Insurance Beneficiary?

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July 1, 2022 •  The Estate & Elder Law Center of Southside Virginia, PLLC
Choosing a beneficiary can be very simple, yet very important in any account that requires it.
Robert W. Haley, managing lawyer
Robert W. Haley
Certified Elder Law Attorney® Robert W. Haley brings over 27 years of legal expertise and knowledge to his firm, which concentrates solely on the areas of elder law, estate planning (Last Will & Testaments, Durable Powers of Attorney, Health Care Powers of Attorney, Living Wills, Trusts, etc.,.) Asset Protection/Medicaid Planning and fiduciary services. For many years, Robert practiced in real estate law, and in general practice, but decided to narrow his focus to elder law and estate planning when he realized the tremendous need for proper planning to be filled in Southside Virginia.

If you’re married, unless there are very unusual circumstances, your spouse should be your life insurance beneficiary, especially if you live in a community property state.

A community property state is a state where any asset acquired during marriage is considered to be community property, which means it’s equally owned by each spouse. Any income that either spouse makes during the marriage is community income.

However, there are exceptions that permit spouses to own assets separately from each other. Gifts, inheritances and assets acquired before the marriage are all considered separate property.

There are only nine community property states, plus three states that allow residents to opt into community property law. The other 38 states plus Washington D.C. follow a common law property system where ownership of marital assets is more straightforward: whoever acquired the property owns it outright. However, a couple can choose to become joint owners, such as through a joint bank account.

If you’re now wondering which states are community property states, they are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

If you’re single, you might have a tougher time naming a life insurance beneficiary.

If you have minor children, ask a lawyer about naming a trust as beneficiary.

If you have a disabled family member, consider a special needs trust.

If you don't have a trust, you can name an adult family member or any other trusted person. However, remember that if you name an adult family member, once the proceeds are paid, those funds legally belong to that individual. Therefore, you better really trust that person and make certain that he or she understands that the funds need to be used for the intended minor child/children.

Finally, when making your decision, do so as if this account would be paid out tomorrow.

You should always consult with an estate planning attorney. Book a call with one of our staff members to discuss how to handle your life insurance beneficiaries! We have offices located in Bassett, Danville, and Lynchburg to better serve you.

Reference: Cision (May 20, 2022) “How to Choose a Life Insurance Beneficiary”

Suggested Key Terms: Estate Planning Lawyer, Life Insurance, Probate Attorney, Beneficiary Designations, Community Property

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