- How marriage affects life insurance coverage
- December 23, 2013
Matlin says one of the more common reasons a policyholder sets up a trust is because they don’t want to give a lump sum of money to a beneficiary who can’t really handle it.
“If an adult beneficiary has a history of being immature with money, the policyholder can have a separate trustee dole out the money to them under certain terms and conditions,” Matlin explains. “The policyholder should determine what their goals are for the benefit and talk to a lawyer to put those terms into legalese.”
Following a divorce, there is always a possibility that the policyholder never got around to changing the beneficiary on their life insurance policy, and inadvertently ends up leaving the death benefit to their former spouse.
“One of the worst things that can happen is making the former spouse the beneficiary to their estate. Going through probate isn’t that horrible, but it’s a public process and it opens the door to anybody who wants to disrupt the process such as a long lost relative,” said Matlin. “If you don’t have your favorite daughter as the contingent beneficiary on the policy, that money could go to the junkee son that you haven’t seen or heard from in 20 years.”
Changing the beneficiary on your policy is doubly important if you marry for a second time. When you purchase life insurance, only you as the policyholder can change the beneficiary. Your new spouse should be included on any current life insurance policies you have.Pages: 1 2 3
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