Financial Planning

Why You Need to Name Your Insurance Beneficiaries

Life insurance and annuities can bring protection and retirement income that help people meet their financial needs and goals. When you buy these items, you get the opportunity to name beneficiaries who will receive distributions after you pass away. This article provides insight into why you name beneficiaries and how that helps protect you and your estate.

Who can you designate as a beneficiary?

Typically, you can choose any living person whom you would want to financially benefit from this contractual relationship. However, you usually cannot name minors as beneficiaries, and the rules and age limits vary by state. If you do wish to leave insurance proceeds to a minor, you could consider listing a trust that is set up for this possibility. Before listing a trust, consulting with an estate planning attorney could help you determine if this is the best plan for your situation.

As you get older, you should periodically reexamine your beneficiary designations to help ensure that the information is up-to-date.

Why do you name them?

When you put money into your life insurance and annuities, you gain the protection of those investments.

For life insurance, the policy generally pays to your beneficiaries designated amounts and helps cover burial costs and other overall daily expenses. The goal is to have the money serve as a safeguard against any income lost as a result of the insured individual’s death.

With annuities, you have the ability to start taking withdrawals in retirement for income. Should you still have value in your annuities after passing away, your beneficiaries receive the distributions.

What happens if you don’t name a beneficiary?

If you don’t name a beneficiary to your life insurance and your annuities, upon your death, your family could lose all the money you’ve invested. Your assets could go through probate and leave family members directed by the provisions of your will. Additional tax consequences for your estate could also emerge as a result of having no beneficiaries in place.

How does naming beneficiaries affect your will?

Having a will is an important part of an estate plan because it lets your executors know how to fulfill your wishes and needs upon your death. Your beneficiaries are unique in this aspect: When you name beneficiaries to your life insurance and annuities, their designations will override any direction of your will. For this reason, you need to make sure all beneficiary designations are up-to-date and reflect your wishes today.

Ultimately, naming beneficiaries for your life insurance and annuities is as important as having the financial protection that these investments can provide you. Not only will you help ensure that your family benefits from the invested value of your money, but you could also avoid hefty tax consequences on your assets more effectively.


Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Allos Investment Advisors, LLC.

The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.

Published for the blog on May 6, 2020 by Allos Investment Advisors, LLC.


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