Beneficiary Designations
A beneficiary is the person or entity designated by the owner of the policy as the recipient of funds under a life insurance policy at the time of the insured’s death. There are two kinds of beneficiaries, Primary and Contingent.
Primary Beneficary(ies) are the person(s) or entity you choose to receive your life insurance proceeds. Payment will be made in equal shares unless otherwise specified. In the event that a designated primary beneficiary predeceases the insured, the proceeds will be paid to the remaining primary beneficiary in equal shares or all to the sole remaining primary beneficiary.
Contingent Beneficary(ies) are the person(s) or entity you choose to receive your life insurance proceeds if the primary beneficiary(ies) die (or the entity dissolves) before you die. Payment will be made in equal shares unless otherwise specified. In the event that a designated contingent beneficiary predeceases the insured, the proceeds will be paid to the remaining contingent beneficiaries in equal shares or all to the sole remaining contingent beneficiary.
Beneficiary designations are an important and often complex subject, and the beneficiary designations outlined below are not an exhaustive listing. Here are some suggested wordings for the following situations:
One Primary Beneficiary
"Jane Doe, Wife."
Two Primary Beneficiaries
"John Doe, Father, and Jane Doe, Mother."
Two Primary Beneficiaries in unequal shares
"John Doe, Father, as to seventy-five percent (75%) and Jane Doe, Mother, as to twenty-five percent (25%) or to the survivor." Note: Always use percentages, not dollar amounts or fractions.
One Primary Beneficiary and one Secondary Beneficiary
"Jane Doe, Wife, if living, otherwise Jack Doe, Son."
One Primary Beneficiary and two Secondary Beneficiaries
"Jane Doe, Wife, if living, otherwise Jack Doe, Son, and Janet Doe, Daughter, or to the survivor."
Two Primary Beneficiaries and one Secondary Beneficiary
"John Doe, Father, and Jane Doe, Mother, or the survivor, if either survives; otherwise Jack Doe, Brother."
Unnamed Children (per Stirpes)
"Children born of the marriage or legally adopted of John Doe and Jane Doe, per stirpes."
Trustee (Inter-Vivos Trust)
"Trustee or the Successor Trustee(s) under a written trust agreement with, dated."
Trustee (Testamentary)
"Trustee(s) of the Trust created under the Last Will and Testament of Insured."
Creditor
"Northern Bank, Creditor of the Insured, as its interest may appear and any balance, if any, to."
Partnership
"Smith and Smith, a Partnership, 123 Main Street, Chicago, IL."
Corporation
"Smith and Smith, Inc., a Delaware Corporation, 123 Main Street, Chicago, IL."
There are other issues that may require consideration, such as the policy/contract definition of terms, and we have not addressed such situations as: payments to minors, common disaster clauses and method of payment. These frequently may be important considerations for the policy owner.
Finally, beneficiary designations were never intended to replace a properly drawn will or the ongoing management that can be provided by a trust. As always, we encourage the policy owner to seek and rely upon their own tax and legal counsel.