Eligible and ineligible people as beneficiaries to life insurance policy (2024)

FAQs

Who cannot be a life insurance beneficiary? ›

Whatever you do, don't name the child as the beneficiary—the law prohibits anyone from receiving a life insurance payout if they aren't the age of majority (which could be 18 or 21 depending on your state). Consult with an attorney if you have a disabled or special needs child.

Immediate family as beneficiaries

Anyone who will suffer financially by your loss is likely your first choice for a beneficiary. You can usually split the benefit among multiple beneficiaries as long as the total percentage of the proceeds equal 100 percent.

Write the names of the main individual(s), entity (such as a charity, business, religious organization, funeral home, etc.), trust, or estate. You may name more than one. All secondary beneficiaries listed will receive EQUAL SHARES (equal amounts) of your benefit if ALL of the primary beneficiaries are deceased.

You can name any person or entity your life insurance policy's beneficiary. A married person often names their spouse as the primary beneficiary, and many people name their children. If you designate a minor as a beneficiary, life insurance rules require a legal guardian to manage the proceeds until the child is 18.

A beneficiary is a person (or entity) who is designated to receive the benefits of property owned by someone else. Beneficiaries often receive these benefits as part of an inheritance.

The policy owner is the only person who can change the beneficiary designation in most cases. If you have an irrevocable beneficiary or live in a community property state you need approval to make policy changes. A power of attorney can give someone else the ability to change your beneficiaries.

You can also choose a more distant relative or a friend. If you want to designate a friend as your beneficiary, be sure to check with your insurance company or directly with your state.

If a policyholder dies and no beneficiaries can accept the death benefit, the money is paid out to the insured's estate and a probate court distributes the money. Does life insurance go to next of kin? Your next of kin can get the death benefit if you make them the beneficiary — or if the benefit goes through probate.

In some cases, it is easier to name your partner as a beneficiary than it is to own a policy on the person. When you fill out your application, name your beneficiary as “partner” or “significant other,” rather than “boyfriend” or “girlfriend”. There's also an option to name your estate as the beneficiary.

Name only living persons as beneficiaries, unless you are naming a trust, your estate or an organization. Do not name the same person or organization as both a primary and secondary beneficiary. Do not use the word “or” when designating multiple beneficiaries. Do not impose any conditions on payment.

What is an eligible beneficiary designation? ›

— The term “eligible designated beneficiary” means, with respect to any employee, any designated beneficiary who is— (I) the surviving spouse of the employee, (II) subject to clause (iii), a child of the employee who has not reached majority (within the meaning of subparagraph (F)), (III) disabled (within the meaning ...

That beneficiary does not have to be a person. It can be a charity, a church, or even a trust. In fact, there are several strategic reasons why people frequently name a trust as the beneficiary of a life insurance policy. One of those is when the purchaser of the policy is the parent of a minor child.

Life insurers have begun using the U.S. Social Security Administration's Death Master File as well as other search technologies to determine if a person insured under an individual life insurance policy has died; if they can confirm the death, the insurer will initiate a search for their beneficiaries.

Designate a family member or friend.

If you're married and live in a community property state, the law usually requires your spouse to be a life insurance beneficiary.

There's no deadline for filing a life insurance death benefit claim — that's good news if you're concerned about how long after death you have to collect life insurance.

“Technically, you're allowed to name your minor children as beneficiaries,” says Matt Lyon, USAA advice manager. “But you should be cautious before doing so.” According to Lyon, parents can achieve their life insurance goals without naming their minor children as beneficiaries — and that's usually for the best.

You can name almost anyone as a beneficiary — including an individual, a group of people, a charity, a business, a trust or even your own estate. There may be tax implications depending on your choice, however, and your benefits provider or state of residence may add certain restrictions.

A will cannot override a beneficiary designation because the policy is a contract between the person who purchases it and the issuer. The only way anyone can override a beneficiary other than the policyholder is if a court determines there's a conflict between named beneficiaries and state laws.