Planners have an obligation to suggest to clients that they review the beneficiary designations made under life insurance policies (as well as employee benefit and retirement contracts) at least every two to three years or upon the occurrence of circumstances marking changes in marital status (the client’s or the beneficiaries’), the beneficiaries’ needs or abilities to handle money, or tax law.
It is also important that life insurance beneficiary designations be coordinated with the entire estate plan. Planners should note that a designation in a will typically does not result in a change of life insurance beneficiary (especially if the method of beneficiary change in the policy is exclusive which it almost always is) nor, as stated previously, does divorce make a change effective in most states.
Reproduced with permission. Copyright The National Underwriter Co. Division of ALM