Once you buy life insurance, it is equally important to correctly identify your beneficiaries. Make sure you understand your options and make informed decisions.

Spouses, children and more

Those who are married typically name spouses as primary beneficiaries.

Parents may want to name children as primary or secondary beneficiaries, but the children's ages can make a difference. Minor children may need to have a legal guardian appointed before life insurance proceeds can be paid. In most states, the Uniform Transfers to Minors Act (UTMA) is one way children can receive life insurance proceeds as beneficiaries. Through the UTMA, parents name an adult to manage proceeds placed in an account at an insurance company or financial institution until the child is recognized by state law as an adult. However, the dollar amount of life insurance proceeds that may be paid in this way is limited.

Other family members or friends can be selected as beneficiaries, too. Or, through the assistance of a lawyer, a trust can be designated as a beneficiary.

Be specific

Using specific names is usually less problematic than general descriptions such as "spouse" or "children," especially when divorce, remarriage, blended families and adoptions are considered. By using names, you can be sure the life insurance proceeds go to the intended individuals without accidentally omitting step-children or mistakenly including ex-spouses. To ensure that children born after a beneficiary designation are included, you may want to consider a designation such as "all children born of my marriage to [spouse]", while also naming the children who are alive at the time of the designation.

Check annually

If you get in the habit of checking beneficiaries regularly -- for example, the same month every year -- you keep your choices current. You should also check beneficiaries after life-changing events -- such as weddings, divorces, births and adoptions.


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