- Name both a primary and a contingent beneficiary, and use full legal names.
- Do not name a minor child directly; use a trust, custodian account or another structure.
- Review your beneficiary form after every major life event, because it overrides your will.
Your life insurance beneficiary designation is one of the most important documents you will fill out, and one of the most often neglected. The person named on the form receives the money, regardless of what your will says. Getting it right takes a few minutes; getting it wrong can cause delays, disputes or a payout to someone you never intended.
Primary and contingent beneficiaries
- Primary beneficiary: the person or people who receive the death benefit first. You can name more than one and specify percentages, for example 60% and 40%.
- Contingent beneficiary: who receives the money if the primary beneficiary has died or cannot be found. Without a contingent, the proceeds may end up in your estate and go through probate.
Always name both. A common arrangement is a spouse as primary and children, or a trust for them, as contingent.
Be specific
Use full legal names, dates of birth and relationships. Vague designations such as "my children" can cause confusion, particularly in blended families, or if you have children later. Include current contact details so the insurer can find your beneficiaries when the time comes.
Naming a minor child
A minor cannot directly manage a large payout. If you name a child, a court may need to appoint a guardian of the estate to manage the money, which can be slow, costly and inflexible. Alternatives include:
- A trust. You choose a trustee and set the rules for when and how funds are distributed.
- A custodian under UTMA. Funds are held for the child until they reach the age set by state law.
- Naming a spouse as primary, with the trust or custodian arrangement as the contingent beneficiary.
See also our checklist for new parents.
Per stirpes or per capita?
Some designations let you specify what happens if a beneficiary dies before you. With per stirpes, a deceased beneficiary's share passes to their descendants. With per capita, it is divided among the surviving named beneficiaries. The right choice depends on your family, and the form usually has a box to check.
Should you name your estate?
Naming your estate as beneficiary sends the proceeds through probate, which can delay payment and may expose the money to the claims of creditors. Naming people or a trust directly is usually simpler. There can be reasons to name the estate, but they are specific and worth discussing with an attorney.
Special situations
- A dependent with a disability. Receiving money directly can affect eligibility for means-tested benefits. A special needs trust is a common solution, and an attorney should set it up.
- Charities. You can name a charity as a beneficiary. Make sure you use its exact legal name.
- Divorce and remarriage. Laws differ on whether a divorce automatically removes an ex-spouse from a policy, so update the form yourself. See life insurance and divorce.
Keep it up to date
Review your beneficiaries after marriage, divorce, births, deaths in the family and any other major change. The beneficiary form overrides your will, so an outdated form can send money to an ex-spouse or someone you no longer intend to benefit. Let your beneficiaries know the policy exists and where to find the documents, so they can start the claim process without delay.