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Life Insurance & Estate Planning Mistakes to Avoid

Life insurance is a powerful financial tool, but its effectiveness can be greatly reduced by easy-to-make mistakes. These mistakes can prevent your beneficiaries from receiving the full amount, or even receiving any of the payment they are owed from your policy. Here are some common mistakes that can affect your life insurance policy’s power.

Designating the Wrong Beneficiary

Life circumstances change, and the person you had listed as your beneficiary may no longer be the right person. Divorce, changing relationships, even the death of a beneficiary can require a change to your life insurance policy. Forgetting to do so can cause frustration for your surviving loved ones, and may result in your life insurance benefits going to a person you didn’t intend.

Designating a Minor as Beneficiary

Life insurance companies cannot pay life insurance benefits to a minor child. Instead, they will make the payments to a court-appointed guardian, generally the child’s other parent. If you are divorced, this could mean that your ex-spouse will manage the funds until your child reaches adulthood. If you wish to pass your policy benefits to your children, it is a better option to designate a trust as the beneficiary of your policy. The person managing your trust will also manage the funds and control how they are distributed to your children.

Our Phoenix estate planning attorneys can help you navigate the complexities of life insurance and other estate planning issues. Taylor & Lihn, PLLC we are supported by 30 years of collective legal experience. We are well-equipped to help you tackle your estate planning needs, including designating beneficiaries, creating a trust, and more.

Start your estate planning today with a complimentary initial consultation. Contact our firm online or by calling (602) 900-9860.

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