Do I have to name my spouse as my primary beneficiary on my life insurance? Who is eligible to be a beneficiary, if I don't choose my spouse?
Answers | 4
A bit more detail, to follow Benjamin's answer. You, as the Owner of the policy, have the right to name Beneficiaries; I use caps to denote the parties, of which there are 3, including Insured. However, some Beneficiaries can turn out to be problematic for the parties.
A minor (one of your kids, for instance) may be named but when the time comes to receive the benefit, their minor status can cause some issues; legally, minors are not allowed as parties to a contract.
A living human being, believe it or not - when named on your policy - might also be problematic.
Consider that I (the Insured) might be in the car with my wife (my Beneficiary) when that car goes over the cliff. That leaves the question of "where does the money go?" The kids? They were in the car, too. Had I named a non living entity as my Beneficiary, there would be a place for it to go.
Along the same line of thought, many people make spouses their Beneficiary. And, in many cases, there are divorces followed by no change of Beneficiary. Ooops!
My personal favorite is the trust; it takes away the demise of the living Beneficiary issues, the divorce issues, the minor issues, and replaces them with an element of control detailed in a legal document that is as durable as are Articles of Incorporation that are used to form corporations. Updating the trust every year or so keeps pace with life changes. Last item on trusts: the trust can disperse funds on a schedule to whomever I choose, while a life insurance company is simply going to issue a check.