When my daughter Lucy was born three years ago, I knew I needed to get life insurance. But as a single parent, I blunted when it came time to choose a recipient. Should I designate my father, who 83 years old is more focused on his own life span? I also have two brothers, one who has children and one who does not. If I were to die, what brother would be responsible for managing a policy payment?
I'm not alone in my confusion. When I shared my experience, an unmarried wife in a domestic partnership shared her own, completely different set of questions when deciding whether the recipient of her life insurance would be her partner or her parents.
While a good rule of thumb may be choosing the person most affected by your death, the decision can become confusing, especially if you have several people in your life who may have cosigned on loans or mortgages, be actively involved in raising your children or maybe financially dependent on you.
Knowing what a recipient is and how a recipient is called can help you limit the best decision for your situation.
What is a recipient?
A recipient is a person who will receive the payment from a life insurance if you were to die. The proceeds from the payment can be used to help pay for financial needs ̵1; those that come with death, such as funeral arrangements and other end-of-life expenses, along with daily bills such as mortgage and child care.  You can name two (or more) people as recipients, and describe how much of the policy the payment each would be given. You can also name a contingent recipient who could receive the death benefit if something happened to the primary beneficiary.
For some, named two beneficiaries – say one partner and one parent – may be meaningful, especially if both could face financial straits. For others, a beneficiary, with a legitimate beneficiary, gives the most meaning. The latter is what we usually see at Haven Life.
Who should you name as a recipient?
Who you are as a recipient is unique to your own circumstances. An important reason why people buy a life insurance is for peace of mind when it comes to the family, to know that life insurance is in place in the event of your death. Think about it that way, your life insurance is really their safety net. If you live with your partner, would they still be able to pay bills or a mortgage without your income? Similarly, if you provide support to your parents, how would they find challenges without having to fund you? Would they be responsible for taking out any of your debts?
Maybe your parents have cosigned on your mortgage or student loan or helped you with an advance payment. Maybe your partner has to step back from work when you moved.
While you "owe" to everyone in your life depends on the terms of the specific agreements, thinking on this issue can help you judge how the money from a payout can be used.
Here are some common scenarios of new policyholders when choosing a recipient:
I'm married to children
Congratulations, you have it easy. If you are married to children, the name of a spouse as a primary recipient is the best for most. In this way, your partner can use the proceeds of the policy to help give your children, pay mortgage loans and ease financial difficulties that your death can bring. This applies even if a spouse is the home parent. If he or she were to pass by, how would childcare and housework pay for? In this case, it may be smart for both spouses to have a policy with their partner as the primary beneficiary. Don't forget to include quota recipients, who would usually be the parents or guardians of the children.
I'm married to no children
You should also have a simple decision to name a recipient. In this case, most of them list their partners as a recipient and a parent as a contingent recipient.
Brittney Burgett, Communications Manager at Haven Life, named her husband Clayton as the premier recipient and her mother as a contingent in the case happened to Clayton. The 30-year $ 500,000 policy she bought is enough for her husband to pay off the mortgage and have some extra money to help him live comfortably financially.
Other beneficiaries of married couples without children: A charity you love, family members whom you financially support, a close friend or your siblings.
I am single parent
You might buy a life insurance policy to make sure your child will take care of financially if you die. You can name a child as a recipient, but you should be aware that life insurance companies cannot pay a policy to a minor. When a minor is a primary beneficiary, most states use the Uniform Transfer to Minors Act, which allows the proceeds of a life insurance benefit to be transferred to a child's named guardian. This can be complicated, so it is important to list a storage notification immediately after the name a minor as the recipient. (For example, in Haven Life, if a minor is listed, a deposit is required to complete the receipt drawings.)
Other options are: name a trust as recipient for your child's account or you can name a trusted family member, who you know your child's best interests in mind, who can also be custodians named in your will.
If you are a single parent whose financial plans overlap with a family member – for example, you may have a multi-generation living arrangement in place – these circumstances should also come into play with your decision.
I'm single without children
If your parents or other family member cosigned a mortgage, student loan, or car loan, denoting them as a recipient will help them shoulder the financial terms of the contract if you were to die. Also, think about who is likely to take the lead in funeral arrangements for you. Naming this person as a recipient can prevent them from the financial burden of a funeral (or help them plan the greatest funeral all the time.)
Remember: you can always change your recipient when your life conditions change. But kudos to you to get a policy while you are young and healthy. The long-term cost savings on life insurance are worth it.
I have several financial obligations for family members
You do not necessarily have to choose a recipient. With Haven Life you can choose up to 10 primary beneficiaries, which you can specify how much of a percentage of the death benefit they would receive if you were to die. Of course, the more recipients you call, the less money you would get for each one. In general, most one or two primary beneficiaries and one or two contingent beneficiaries name to ensure that their bases are covered.
How to choose a contingent recipient
A contingent recipient is a person who pays the life insurance go to if the primary recipient could no longer receive the compensation (for example, if both you and your partner were to die at the same time). Think of them as an understudy to the primary beneficiary.
For example, if you are married to a child, a quota recipient may be the custodian named in your will. No one likes to think about what would happen if both parents were to die at the same time, but by undergoing this thought process, it may be certain that your children would be cared for, even if you were not both here.
When Should a Beneficiary Be Trusted?
When I ended up naming my brother as the recipient of my life insurance policy – he also called as my dot's guardian in my will – I could have established a revocable living trust that would be called my life insurance recipient as a way to make sure my daughter get the money from a political payment.
The alternative of creating a trust also has benefits for married couples. If both were to die, confidence assured that a life insurance payment would be used for the insurer's wishes and could avoid a long court process.
Establishing trust can help parents target how much money and age their children receive. It also provides a trusted family member, friend or professional manager with the ability to provide the necessary monitoring, guidance, and control to ensure that the money is used wisely for the children's long-term benefit.
"The trustees, usually a family member, can allocate funds to the children according to the trust's specifications," says Chris Huntley, author of life insurance recipients and minors . "For example, trust may allow annual dividends to be made to the new the guardian / s to help raise and care for the child or allow money for their first car or college education. "
If you are considering a trust, consult a tax advisor to ensure that you do not accidentally create a life insurance income will not be taxable, but if the beneficiary, the insured and the policy owner are three different persons, you may need to reconsider the structure of your life insurance.
When you name a trust as a recipient, you must include:
- Trust Name
- A dress
- Tax ID number (SSN / EIN)
- Trust date
- Trust type
Common mistakes when naming a beneficiary  It turns out to be a minor (without storage) as the recipient is a relatively common mistake that I am glad that I have smoothly avoided doing. Knowing what you are not doing can also help you find the best person to name as a recipient. Some other things that give policyholders a name when they call a recipient:
Not to tell anyone that they are the recipient – Although this may seem like a surprising scenario, it is quite common. Nobody likes to talk about or even think about death. Speaking through your wishes – and hearing your should be the recipient's post – gives important questions and discussions that can help clarify whether you are on the same page. And it gives you both with peace of mind. Make sure your recipient knows you have purchased a policy, how much it is and where they can find the details of the contract in the event of your death. Use this time to make sure that all information, including date of birth, address, current contact information and social security number, is correct.]
Named a minor as beneficiary – Legally one child under the age of 18 and in some states under the age of 21 may Do not get access to life insurance death compensation. If you have not named a guardian or made a trust in managing the money, the court will deal with the distribution of the benefit for you, which can be very complicated. There are some ways to navigate this difficult situation. Often, the easiest solution is to create an UTMA custodianship with the life insurance company. This ensures that the child receives full death benefit for the policy. You also need to name a custody accountable for the assets until your child is no longer considered a minor by the state (usually between 18 and 21 years). Another option is to create a fund that can receive life insurance. If you decide to go on the trust route, make sure it is specified how the money will be delivered – installments, a sum when the child becomes a certain age etc.
Don't forget to update your recipients – Just as you should review your political Need for major life events, you should also regularly review your political recipients and the information provided. Common surveillance includes incorrect contact information, listing a previous spouse or registering a guardian when a child is no longer a minor. The last thing a recipient should have to worry about when losing a loved one is how to collect the income they may need to immediately cover the current expenses.
Not Considering State Aid – If your recipient receives any state aid, you want to ensure that the receipt of death benefits from your life insurance does not disqualify them from further assistance. For example, if you have a child with special needs and name him or her as your recipient, they may no longer be eligible for state aid because of the sum of the "gift". This is another instance where you want to investigate naming your guardian as a recipient or setting up a special fund.
Suppose a will covers all updates. – Your life insurance policy is a legal contract, which means that the terms stated on it are those that come into force if you die. Your will does not control or trump this contract. For example, if your will list your recipient as your husband and life insurance policy has your ex-husband listed as the recipient, the death benefit will be paid to your ex. Best to avoid the potentially unpleasant situation altogether by consistently monitoring your recipient drawings.
(Inadvertently) make your death allowance taxable – Here things can be quite tricky. Typically, a life insurance death benefit received free from federal income tax. However, there are situations where the payout is considered a taxable income event or a "gift" that may be subject to federal and state gift fees. This can happen if a third party recipient is involved (someone who is not the owner or the insured) then the death benefit is a gift and may be subject to the gift fee. For example, if you are the owner of a policy that covers your spouse and names your child as a recipient. To avoid this, the insured and the owner should be the same person.
Beneficiaries: The Life and Soul of Life Insurance
The purpose of buying a life insurance is to provide financial protection for your loved ones. To do so, you must name someone as a recipient.
It is important that you do not treat the naming of a recipient as a check box in your life insurance application. Pay attention to who you name as a recipient, the information you provide on them and regularly check in to ensure accuracy.
No matter what your personal circumstances are right now, there are two things that are clear: Buying a life insurance now, rather than later means you can lock in lower prices, because the younger and healthier you are, the less you pay in premium . Second, remember to judge whether you need to make any recipient change if your life conditions change, you can give yourself security. For example, a 30-year-old woman with excellent health can buy a 30-year $ 500,000 home-time policy issued by MassMutual for $ 27 per month. The 30 years could be filled with many great habitats such as marrying, buying a home, having a child … having a second child – all of whom will benefit from the calm of mind that affordable coverage was secured long ago. Due diligence early and the whole life of your policy would save your loved ones unnecessary stress and possibly a lot of money if something happened to you.
Anna Davies has written for the New York Times, New York Magazine, Refinery29, Glamor, Elle and others, and has published 13 young adult novels. She lives in Jersey City, NJ, with her family and loves traveling, running and trying to find the best cold brewed coffee in town. Opinions are her own. Sponsored by Haven Life.
The information provided is not written or intended as special tax or legal advice. The Garden Life Insurance Agency does not provide tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal adviser. People involved in the planning process should work with a real estate planning team, including their own personal legal or tax advisors.
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Haven Term is a life insurance service (ICC17DTC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111 and offered exclusively by the Haven Life Insurance Agency, LLC. The policy and rider's form numbers and features may vary by state and may not be available in all states. In New York, Haven Term DTC-NY is 1017. Our license number in California is OK71922 and in Arkansas, 100139527.