If you haven’t done it recently, I strongly recommend that you check your existing life insurance policies for one or more of these mistakes.
1. THE INSURED’S ESTATE HAS BEEN NAMED BENEFICIARY. If the policy has a named beneficiary, the death benefit can be paid without the hassle of probate.
2. THE POLICY HAS NO NAMED CONTINGENT BENEFICIARIES. If the primary beneficiary predeceases the insured, the next default beneficiary is usually the estate - and that means probate is necessary.
3. MINORS OR OTHER IMPAIRED PERSONS HAVE BEEN NAMED BENEFICIARIES. If young children are in line for life insurance money, it usually means a court has to supervise the process and administration of the funds. That can be avoided with proper planning.
4. THE BENEFICIARY LANGUAGE IS WRONG OR UNCLEAR. Estate planning attorneys run into circumstances all the time where the beneficiary designation doesn’t match the insured’s intentions.
5. FAMILY NEEDS ARE NOT ADEQUATELY ADDRESSED. It used to be that a million dollar insurance policy felt like it was enough to take care of family needs in the event of the breadwinner’s death. For many, that’s not nearly enough any more.
6. THE WRONG OWNERSHIP WAS CHOSEN FOR THE PROBLEM TO BE SOLVED. Most people choose to own their life insurance policies personally. That can be a mistake in certain business situations, or where there’s a family estate tax problem.
7. BUY-SELL FUNDING POLICIES HAVE NOT BEEN PROPERLY REVIEWED. Business owners sometimes use life insurance to help make sure the business will continue after an owner’s death. Even where a plan has been put in place, failure to update it can have disastrous consequences for the owners and their families.
8. POLICIES HAVE NOT BEEN REVIEWED AFTER DIVORCE (OR OTHER LIFE EVENT). People sometimes forget to remove an ex-spouse as beneficiary under a life insurance policy. They also sometimes forget that their divorce papers require them to use existing life insurance policies in certain ways.
