Complete Video Transcription:
NOVATO — Host, Sarah Rutan: Whether you have or are planning to make a legal will or trust, you’ll need to know some important guidelines regarding beneficiary designation. Today we’re in Novato with Carl Lundgren of Mitchell & Mitchell Insurance Agency to learn more.
Diamond Certified Expert Contributor, Carl Lundgren: When I’m talking about beneficiary designations, I’m talking about the people or entities that you designate on a financial document. These are the people who will receive the proceeds when you pass away. Ideally, you would have an attorney review those documents from time to time. Especially if you have a trust, because a trust, and those documents, might be inconsistent in how they ready, and that could cause problems. But, often times, just naming your spouse as the beneficiary is sufficient. It depends on the situation, how much money is involved, and so forth.
With life insurance, not only do you have a beneficiary designation, but you also have something called the insured and the owner. The insured, of course, is the person with whom the life insurance is – life is placed on. The owner is the person who controls a policy. That person can actually change the beneficiary at any time they want. So, it’s important to know who the owner of your life insurance policies are. Luckily, most of the time, both the insured and the owner are the same person. Here are three common mistakes that are made with beneficiary designation.
Number one. Assuming that your will will take care of matters. A beneficiary designation trumps your will. So, if your will says one thing and the beneficiary says another, your beneficiary rules. So, those ought to be consistent. But, if you don’t review your beneficiary designations, then your will is not going to take care of it.
Number two. Not reviewing all your beneficiary designations once in a blue moon. And when I mean once in a blue moon, I think once every three to five years, or sooner if a major life even occurs. All kinds of things, you know, including your qualified plans, life insurance policies and so forth, have beneficiary designations. And, most companies require that you put one down. Not always, but most of the time. So, that’s not a very common problem. But, what is very common is when you have a life change. Was there a divorce, was there a death in the family, are there children of another marriage that are involved – all those things can highly impact where the proceeds of your life insurance policy go, for example.
Mistake Number Three. Naming minor kids as beneficiaries. The problem here is that, in most states, if you’re under eighteen, they will not give you the proceeds. If you’ve not named a guardian or somebody else to take care of the proceeds on the children’s behalf, then the courts going to appoint somebody for that. That, of course, is costly again, and it may have unintended consequences. And, for example, let’s say that you got divorced and you don’t want your spouse – ex spouse – handling the funds for the kids – too bad. Because, most likely, the state’s going to give the funds to your spouse on behalf of the kids. Grant it, they have to make a report once a year to make sure that they’re handling those funds properly, but that can be a little dicey.
There’s a lot I haven’t mentioned on this video, but the basis are just to make sure that you review your beneficiaries regularly, talk to your agent, talk to the insurance company, talk to your attorney, of course, when possible. Thanks for listening.
Host, Sarah Rutan: To learn more from local top-rated companies, visit our Diamond Certified Expert Reports at experts.diamondcertified.org.
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