Outline requirements before selecting a beneficiary
Before choosing a beneficiary, it is important to outline some of the key factors that may help your family when you are not around.
The factors include state regulations, policy guidelines or any outstanding debt. You will need to ensure that you have no tax problems, or any other expenses to pay. Moreover, understand the requirements of the policy, as in some cases, the insurer will want your spouse to sign a waiver before you can name a beneficiary. Moreover, if you were running a business, and have debts to pay, you may want the money to be used for payments. In that case, naming your state a beneficiary will be a wise option as your spouse may spend the money.
Ultimately, it will be a personal call when one decides to select a beneficiary. While most will to protect their families and relatives, it is important that you consider other financial factors in order to leave your loved ones in a healthy state.
In case if you are single
In case you are single, it is best to name a Revocable Trust as the primary beneficiary. That trust will hold the money for you, and will further ensure proper handling of your funds. After paying for tax, they will determine the beneficiaries of your policy, and pay them their due share. However, if you decide to name a guardian as a beneficiary, make sure that you tell him to pay your outstanding debts.
In case you are married
If married, your spouse is likely to become a beneficiary of the life insurance policy. This way you know that your family has financial protection and the ability to pay out any of your professional or personal obligations.
However, in most cases, naming your estate on your policy will ensure equal distribution of money where you will be protected from any potential law suit. Moreover, after paying for certain debts, the remaining amount will be made available for your child. The state will set up a Trust where the money will be kept.