Chapter 7- Life Insurance Beneficiaries

What happens if all beneficiaries are dead?

If no beneficiary is named when I die or if they're all dead when I die, it goes to my estate.

per capita vs per stirpes

If you don't write the words in, "per capita," then it will automatically pass by blood, through the blood, to this guy's offspring. This only applies when you have multiple beneficiaries on the same level.

tertiary beneficiary

In life insurance, a beneficiary designated as third in line to receive the proceeds or benefits if the primary and secondary beneficiaries do not survive the insured.

primary beneficiary

In life insurance, the beneficiary designated by the insured as the first to receive policy benefits.

These facility-of-payment provision situations include cases where

1) the named beneficiary is a minor, 2) where the named beneficiary is dead, or 3) no claim is submitted within a specified period of time.

secondary beneficiary

An alternative beneficiary designated to receive payment, usually in the event the original beneficiary predeceases the insured.

trust

Arrangement in which property is held by a person or corporation (trustee) for the benefit of others (beneficiaries). The grantor (person transferring the property to the trustee) gives legal title to the trustee, subject to terms set forth in a trust agreement. Beneficiaries have equitable title to the trust property. OR A trust is nothing more than a bucket.When I die, I want my money to go into that bucket. I want the bucket to be my beneficiary. Then I name Cotton, my brother, to be trustee. He will administer the terms of that bucket while I'm in the grave.

So the spendthrift trust protects whom from what?

Beneficiary from the beneficiary's creditors.

irrevocable beneficiary

Beneficiary whose interest cannot be revoked without his or her written consent, usually because the policyowner has made the beneficiary designation without retaining the right to revoke or change it. Some irrevocable beneficiaries have a reversionary clause attached. "Reversionary clause" means it reverts. So if she dies-I have named her as irrevocable beneficiary with a reversionary clause. If she dies, it reverts back to me to name whomever I want to.

revocable beneficiary

Beneficiary whose rights in a policy are subject to the policyowner's reserved right to revoke or change the beneficiary designation and the right to surrender or make a loan on the policy without the beneficiary's consent.

facility-of-payment provision

Clause permitted under a uniform health insurance policy provision allowing the company to pay up to $1,000 of benefits or proceeds to any relative appearing entitled to it if there is no beneficiary or if the insured or beneficiary is a minor or legally incompetent.

per capita rule

Death proceeds from an insurance policy are divided equally among the living primary beneficiaries.

per stirpes rule

Death proceeds from an insurance policy are divided equally among the named beneficiaries. If a named beneficiary is deceased, his or her share then goes to the living descendants of that individual

estate tax

Federal tax imposed on the value of property transferred by an individual at his or her death.

Uniform Simultaneous Death Act

Model law that states when an insured and beneficiary die at the same time, it is presumed that the insured survived the beneficiary. If the insured and a primary beneficiary die as the result of the same accident and they can't tell who died first, the proceeds are paid as if the insured died last. I can add a time frame, let's say 30 days. That way, Lisa has to survive me by 30 days. If she survives me by 30 days, it's as if she survived me for the rest of her lifetime. But if she dies within that time frame, then it's as if she died first.

estate

Most commonly, the quantity of wealth or property at an individual's death.

beneficiary

Person to whom the proceeds of a life or accident policy are payable when insured dies. The various types of beneficiaries are: primary beneficiaries (those first entitled to proceeds); secondary beneficiaries (those entitled to proceeds if no primary beneficiary is living when the insured dies); and tertiary beneficiaries (those entitled to proceeds if no primary or secondary beneficiaries are alive when the insured dies).

contingent beneficiary

Person(s) named to receive proceeds in case the original beneficiary is not alive. Also referred to as secondary or tertiary beneficiary.

common disaster provision

Sometimes added to a policy and designed to provide an alternative beneficiary in the event that the insured as well as the original beneficiary dies as the result of a common accident.

spendthrift provision

Stipulates that, to the extent permitted by law, policy proceeds shall not be subject to the claims of creditors of the beneficiary or policyowner. Applies only to proceeds paid in installments. States that the proceeds are not assignable. To protect my beneficiary from her creditors, I direct that when I die, my proceeds go into a trust called a spendthrift trust.

The decision to name a beneficiary rests with whom?

The policyowner.

Can a business be a beneficiary?

Yees

Can I have more than one primary beneficiary?

Yes

Can I leave my proceeds to a charity?

Yes

Can a trust be a beneficiary?

Yes

Can an estate be a beneficiary?

Yes

Can an individual be a beneficiary?

Yes

Are life insurance policies creditor-proof?

Yes life insurance policies are creditor-proof. Your creditors can't come after it, including the cash values of your life insurance.

Can you leave minors as your beneficiary?

You don't want to name a minor as beneficiary. You may want to name a trust instead.

class of the insured

all children born of the insured or All children born of the insured and said wife

draw back of leaving estate as beneficiary

the primary drawback to leaving proceeds to an estate is that it can increase the size of the estate for estate tax purposes.