What does it mean to be a beneficiary of life insurance?

What does it mean to be a beneficiary of life insurance?

A beneficiary is the person or entity you name in a life insurance policy to receive the death benefit.

What happens when you are the beneficiary of a life insurance policy?

The named beneficiary on a policy generally isn’t required to use any of the death benefit proceeds to pay off the decedent’s debts. Life insurance proceeds that go directly to a named beneficiary never become part of the decedent’s probate estate, so the money isn’t available to creditors.

Can anyone be a beneficiary on a life insurance policy?

A beneficiary can be a person, charity, business or trust. If the beneficiary is a person, they can be a relative, child, spouse, friend or anyone else you happen to know. As some agents like to say, you can even name your “secret lover” as a life insurance beneficiary.

What happens if a beneficiary has died?

Many wills state that beneficiaries cannot inherit unless they live for a specific amount of time after the will-maker dies. In that case, you would turn the property over to the deceased beneficiary’s estate, and it would go to the beneficiary’s own heirs or will beneficiaries.

Do beneficiaries pay tax on life insurance?

Generally speaking, when the beneficiary of a life insurance policy receives the death benefit, this money is not counted as taxable income, and the beneficiary does not have to pay taxes on it.

Can a girlfriend be a life insurance beneficiary?

Besides naming a spouse as beneficiary, a policyholder could choose another family member, such as an adult child, a business partner or even a boyfriend or girlfriend outside the marriage. Insurance companies don’t make moral judgments about who is named as beneficiary.

What happens to unclaimed life insurance money?

Unclaimed life insurance policy proceeds are turned over to the state in which the insured is last known to have resided (often with interest) after a certain number of years have passed, following state laws on unclaimed property.

Can a life insurance beneficiary be changed after death?

Once a life insurance policyholder dies, little can be done to change the beneficiary designation and prevent a dispute. However, policyholders can protect their loved ones and beneficiaries by keeping their policies up-to-date. When life changes happen, changes in the life insurance policy should reflect them.

Does a will override a life insurance beneficiary?

A will or trust doesn’t supersede a life insurance policy. Life insurance beneficiaries are final. Most life insurance policies make it easy to change or update your beneficiary if you change your mind about who should get the death benefit, for example after a divorce.

Does life insurance go to next of kin?

Do life insurance proceeds go to the estate or to the next of kin? The beneficiary named in the policy will receive the proceeds regardless whether he or she is next of kin or not. In case the beneficiary is deceased, the insurance company will look for primary co-beneficiaries whether they are next of kin or not.